Net assets and working capital

Question 1

Define net assets.

Answer 1

• Net assets are the excess of total assets over total liabilities.
• It is also equal to owner’s equity.

Question 2

Define working capital.

Answer 2

• Refers to the excess of current assets over current liabilities
• Also refers to the amount of capital available for the daily operations of a business

Question 3

Write down the formula to calculate owner’s equity.

Answer 3

Owner’s Equity (Net assets)

= Total assets - Total liabilities

Question 4

Write down the formula to calculate working capital.

Answer 4

Working capital =

Current assets - Current liabilities