Question

What is the definition of short-term capital?

1) Asset held for investment or used personally, held one year or less
2) Asset held for investment or used personally, held more than one year
3) Asset held for business purposes, held one year or less
4) Asset held for business purposes, held more than one year

Answer 1

Short-term capital is defined as an asset held for business purposes, held one year or less, making option 3 the correct choice.

Step-by-step explanation:

Short-term capital refers to assets held for a year or less for business purposes. In this context, the correct definition aligns with option 3, distinguishing it from assets held for investment or personal use. The timeframe of one year or less emphasizes the temporary nature of these assets in supporting ongoing business operations.

Unlike long-term capital, which extends beyond a year, short-term capital is crucial for meeting immediate financial needs and responding to the dynamic requirements of a business. This definition is fundamental in financial and accounting contexts, guiding businesses in managing their resources effectively.

Thus, the correct answer is option 3) Asset held for business purposes, held one year or less