Contractor License Practice Exam

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Prepare for the Contractor License Exam with comprehensive quizzes. Study with multiple choice questions, flashcards, and detailed explanations to ensure you're ready for success on exam day!

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If a business has Current Assets of $500,000 and Current Liabilities of $250,000, what is the Net Working Capital?

$500,000
$250,000
$750,000
$1,000,000

The correct answer is: $250,000

To determine the Net Working Capital, one must subtract Current Liabilities from Current Assets. In this case, with Current Assets of $500,000 and Current Liabilities of $250,000, the calculation is straightforward: Net Working Capital = Current Assets - Current Liabilities Net Working Capital = $500,000 - $250,000 Net Working Capital = $250,000 This result indicates the liquidity available for a business to operate, covering short-term obligations and supporting day-to-day operations. A positive Net Working Capital suggests that the company is in a good position to meet its short-term liabilities, which is critical for operational success. Understanding this calculation helps clarify the financial health of a business, revealing how well it can manage its current financial obligations.