What financial metric is calculated by subtracting current liabilities from current assets?

The financial metric that is calculated by subtracting current liabilities from current assets is known as working capital. Working capital is a crucial measure of a company’s short-term financial health and operational efficiency. It represents the amount of money available to cover day-to-day operations and is essential for managing a company's liquidity.

A positive working capital indicates that a company can meet its short-term obligations and invest in its operations, while negative working capital can signal potential financial trouble. By focusing on the difference between current assets (which include cash, inventory, and receivables that are expected to be converted to cash within a year) and current liabilities (obligations due within a year), working capital provides insight into a firm's financial resilience in the short-term.

Understanding this concept is fundamental in business finance, as it helps assess not only the company’s liquidity but also its overall operational efficiency.