Which term describes the difference between a business's current assets and current liabilities?

The term that describes the difference between a business's current assets and current liabilities is known as Working Capital. This financial metric is crucial for assessing a company's short-term liquidity and operational efficiency.

Working capital indicates the amount of money a business has available to meet its short-term obligations. A positive working capital means that a company has more current assets than current liabilities, suggesting it can efficiently cover its short-term debts. On the other hand, negative working capital indicates potential liquidity issues, where the company may struggle to meet its obligations.

The other terms, such as net income, cash flow, and gross margin, refer to different financial concepts. Net income measures a company's profitability after all expenses have been deducted from revenues. Cash flow focuses on the movement of cash in and out of the business, reflecting its ability to generate cash. Gross margin refers to the difference between sales revenue and the cost of goods sold, which helps determine how efficiently a company produces and sells its products. Each of these terms serves a distinct purpose in financial analysis, but it is working capital specifically that pertains to the balance of current assets and liabilities.