Difference between current assets and current liabilities
The measure that reflects the difference between current assets and current liabilities is called working capital. Working capital is calculated by subtracting the total current liability of a company from its total current asset. It is an important metric for businesses to monitor, as it indicates their ability to meet short-term financial obligations and fund day-to-day operations. A positive working capital indicates that a company has enough liquid asset to cover its short-term liability. While a negative working capital may indicate that a company is facing financial difficulties and may struggle to meet its short-term obligations.
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