A Small Company Has Current Assets of $112,000 and Current

question 45

Multiple Choice

A small company has current assets of $112,000 and current liabilities of $117,000. Which of the following statements about that company are most likely to be true?

• A) Since net working capital is high, the company will likely have little difficulty meeting its obligations.
• B) Since net working capital is nearly zero, the company is well run and will have little difficulty attracting investors.
• C) Since net working capital is negative, the company will not have enough funds to meet its obligations.
• D) Since net working capital is very high, the company will have ample money to invest after it meets its obligations.

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Definitions:

Cash Disbursements

The process of paying out money from a company or individual's cash account, usually including expenses, debt payments, and other financial transactions.

Financing Required

The total amount of money needed to start or expand an enterprise, often reflecting external funding needs to cover projected deficits or investments.

Cash Receipts

Monies received by a business during a specified period from transactions, including sales and services.

Credit Sales

Transactions where goods or services are sold and payment is deferred to a future date.