The correct answer is: A. Current liability.
Net working capital is a measure of a company’s liquidity, or its ability to meet its short-term obligations. It is calculated by subtracting current liabilities from current assets. Current assets are assets that are expected to be converted into cash or used up within one year, such as cash, accounts receivable, and inventory. Current liabilities are liabilities that are due within one year, such as accounts payable, short-term debt, and accrued expenses.
A positive net working capital indicates that a company has more current assets than current liabilities. This means that the company has enough cash and other liquid assets to cover its short-term obligations. A negative net working capital indicates that a company has more current liabilities than current assets. This means that the company may not be able to meet its short-term obligations.
Net working capital is an important measure of a company’s financial health. A positive net working capital indicates that a company is in good financial health and is able to meet its short-term obligations. A negative net working capital indicates that a company may be in financial trouble and may not be able to meet its short-term obligations.
Here is a brief explanation of each option:
- Option A: Current liability. Current liabilities are liabilities that are due within one year. They include accounts payable, short-term debt, and accrued expenses. Current liabilities are subtracted from current assets to calculate net working capital.
- Option B: Net liability. Net liability is the total of a company’s liabilities minus its equity. It is a measure of a company’s financial leverage. Net liability is not used to calculate net working capital.
- Option C: Total payable. Total payable is the total amount that a company owes to its suppliers. It is a component of current liabilities. Total payable is not used to calculate net working capital.
- Option D: Total liability. Total liability is the total of a company’s liabilities. It is a measure of a company’s financial risk. Total liability is not used to calculate net working capital.