What is the farm's working capital?

What is the farm's working capital?

• A. 97,854
• B. 197,854
• C. 297,854
• D. 397,854

Answer: (B)

Working capital measures the farm’s day-to-day liquidity. It’s the amount left after paying short-term obligations, calculated as current assets minus current liabilities. In this scenario, the balance sheet shows that current assets exceed current liabilities by 197,854, so the farm’s working capital is 197,854. A positive figure like this indicates the farm has liquidity to cover its short-term needs. If liabilities were higher than assets, the working capital would be negative, signaling potential liquidity issues.

Working capital measures the farm’s day-to-day liquidity. It’s the amount left after paying short-term obligations, calculated as current assets minus current liabilities. In this scenario, the balance sheet shows that current assets exceed current liabilities by 197,854, so the farm’s working capital is 197,854. A positive figure like this indicates the farm has liquidity to cover its short-term needs. If liabilities were higher than assets, the working capital would be negative, signaling potential liquidity issues.