JAMB Commerce 2016 Paper

Concept:Working capital measures a business’s ability to meet short-term obligations using its short-term resources.Explanation:Working capital is computed using current assets and current liabilities.Current assets include cash, debtors, and stock.Current liabilities include creditors and short-term loans.The standard formula is:$$\text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}$$Therefore, working capital equals total current assets less total current liabilities.This shows whether the business has enough short-term assets to pay its short-term debts.The other options either subtract in the wrong order or use fixed liabilities, which are not part of the working capital calculation.Answer:D. Current assets less current liabilities