Question

Which of the following is not an application of working capital?

• A. Day-to-day expenditure of business
• B. Current obligations for payment
• C. Expenditure in the usual course of business
• D. Expenditure to acquire capital

Answer 1

The correct option is D Expenditure to acquire capital

The working capital refers to the excess of current assets over current liabilities. It is the capital that is required to carry out the day to day expenses of operating a business. It is used to meet all the expenses during the ordinary or usual course of business. I t is thus also used to meet the current liabilities or the obligations of the firm. However it is not used to purchase the fixed assets.

Working Capital = Current Assets - Current Liabilities

Thus, the correct answer is D.