What is included when calculating working capital?

Working capital is a financial metric that measures a company's short-term liquidity and operational efficiency. It is specifically calculated by subtracting current liabilities from current assets. This calculation provides insights into whether a company has enough short-term assets to cover its short-term obligations.

Current assets include items such as cash, accounts receivable, and inventory, which can be converted into cash or consumed within a year. Current liabilities consist of obligations that are expected to be settled within the same time frame, such as accounts payable and short-term debt. By focusing solely on current assets and current liabilities, working capital provides a clear picture of the company's short-term financial health and operational capability.

The other options focus on either long-term assets and liabilities or provide broader definitions that do not accurately reflect the specific nature of working capital calculations. This clarity in definition makes the correct answer the most relevant and useful for analyzing a company's financial position.