An increase in current assets increases net working capital

An increase in current assets increases net working capital

26) An increase in current assets increases net working capital, thereby reducing the risk of technical

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insolvency.

 

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

 

27) Net working capital is defined as

 

A) current assets minus current liabilities.

B) current liabilities minus current assets.

C) a ratio measure of liquidity best used in cross-sectional analysis.

D) the portion of the firm’s assets financed with short-term funds.

28) The goal of working capital management is to

A) pay off short-term debts.

B) achieve a balance between short-term and long-term assets so that they add to the

achievement of the firm’s overall goals.

C) achieve a balance between risk and return in order to maximize the firm’s value.

D) balance current assets against current liabilities.

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