Managers Must Understand How Transactions Affect Working Capital

question 72

Multiple Choice

Managers must understand how transactions affect working capital

• A)because GAAP does not allow companies with weak working capital to obtain loans.
• B)because lenders often use this to assess a company's ability to meet current obligations.
• C)so that management can avoid transactions that increase working capital.
• D)in anticipation of meeting creditors guidelines before issuing new stock.

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Definitions:

Marginal Tax Rate

The rate at which the last dollar of income is taxed, representing the percentage of additional income that is paid in tax.

Tax Liability

The total amount of tax that an individual or a corporation owes to the government.

Income

The total amount of money earned or received by an individual or group, typically within a specified period, from work, investments, or other sources.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, illustrating the impact of the next dollar of earned income on their tax liability.