Raw materials are included in _______.

Correct option is B

The correct answer is (b) Working capital
Raw materials are considered part of working capital because they are inputs used in the production process. Working capital refers to the funds required to manage day-to-day operations, including raw materials, cash, and inventory.

Working Capital:

• Includes short-term assets like raw materials, cash, and inventory needed for production.

Fixed Capital:

• Includes long-term assets like machinery, equipment, and buildings used in production.

Human Capital:

• Refers to the skills, knowledge, and expertise of the workforce.

Natural Resources:

• Refers to the land, minerals, and resources available in nature.

Additional Information:

Definition:

• Working capital refers to the difference between a company’s current assets (like cash, raw materials, inventory, and receivables) and its current liabilities (such as short-term debts and payables).
• It represents a company’s ability to meet its short-term financial obligations and support day-to-day operations.

Components of Working Capital:

Current Assets:

• Cash
• Accounts receivable (amounts owed by customers)
• Inventory
• Short-term investments
• Raw materials (as they are used for production and are part of operations).

Current Liabilities:

• Accounts payable (amount owed to suppliers)
• Short-term debt
• Accrued expenses
• Taxes payable

Importance of Working Capital:

• Liquidity Management: Helps ensure that a company can pay its short-term obligations without facing financial difficulties.
• Operational Efficiency: Companies with adequate working capital can maintain smooth production, meet customer demands, and avoid disruptions.
• Growth and Investment: Sufficient working capital allows firms to invest in expansion, purchase additional inventory, or undertake new projects.