Working capital is best described as what?

• A. Long-term investment funds
• B. Short-term finance for day-to-day running
• C. Equity financing
• D. Fixed assets

Answer: (B)

Working capital is the money a business uses for its day-to-day operations. It represents short-term liquidity—the current assets (such as cash, stock, and money owed to the business) minus current liabilities (short-term debts and obligations). This reflects the funds available to pay for everyday running costs like stock, wages, and supplier bills. It’s the reason we describe it as short-term finance for day-to-day operations. It isn’t long-term investment funds, which are for the future; it isn’t equity financing, which is money raised by selling shares; and it isn’t fixed assets, which are long-term tangible assets like buildings or machinery.