Which One of the Following Statements Concerning Net Working Capital

question 85

Multiple Choice

Which one of the following statements concerning net working capital is correct?

• A) Net working capital is negative when current assets exceed current liabilities.
• B) Net working capital includes cash, accounts receivables, fixed assets, and accounts payable.
• C) Inventory is a part of net working capital.
• D) The change in net working capital is equal to the beginning net working capital minus the ending net working capital.
• E) Net working capital includes accounts from the statement of comprehensive income.

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Definitions:

Free Cash Flow

Net cash provided by operating activities adjusted for capital expenditures and dividends paid.

Capital Expenditures

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment.

Cash Dividends

Payments made by a corporation to its shareholder members as a distribution of profits.

Operating Expenses

Costs associated with a company's day-to-day operational activities, excluding direct labor, direct materials, and direct expenses.