The term 'Working Capital' refers to: MCQ with Answer and Explanation

The term 'Working Capital' refers to:
A. Fixed Assets
B. Total Assets - Total Liabilities
C. Current Assets - Current Liabilities
D. Long-term Loans
Answer: Option C
Solution (By JKSSB Mock Tests)
Working capital, or net working capital, is the difference between current assets and current liabilities, representing the short-term liquidity of the firm.

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Practice More Accountancy and Book Keeping Questions

Question #1
A newly admitted partner acquires his share of profit from:
A. The firm directly
B. Profit and loss account
C. Old partners by way of sacrifice
D. Outside parties

Correct Answer: Option C


Explanation:
A new partner's share comes from the old partners who sacrifice a portion of their profit share.

Question #2
S1: Internal audit is a part of internal control. S2: Internal audit is conducted by external auditors. Which statement(s) is/are correct?
A. Both S1 and S2
B. S2 only
C. S1 only
D. Neither S1 nor S2

Correct Answer: Option C


Explanation:
Internal audit is a continuous appraisal system and a vital component of the internal control framework. It is conducted by the management's own staff or appointed internal auditors, not by external statutory auditors. S1 is correct, S2 is incorrect.

Question #3
The 'Operating Profit' is calculated as:
A. Gross profit - Operating expenses
B. EBITDA - Depreciation
C. Sales - Cost of goods sold
D. Net profit + Interest

Correct Answer: Option A


Explanation:
Operating profit = Gross profit - Operating expenses (administrative, selling).