Which of the Following Statements Is CORRECT

question 9

Multiple Choice

Which of the following statements is CORRECT?

• A) Net working capital is defined as current assets minus the sum of payables and accruals, and any increase in the current ratio automatically indicates that net working capital has increased.
• B) Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks associated with using short-term financing.
• C) If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt.
• D) Net working capital is defined as current assets minus the sum of payables and accruals, and any decrease in the current ratio automatically indicates that net working capital has decreased.

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Definitions:

Economic Uncertainty

A situation characterized by unpredictability or instability in economic policies, market conditions, or other financial elements impacting economies.

Macro Uncertainty

Broad, external uncertainties that impact the economic and business environment, such as geopolitical risks, economic cycles, and significant policy changes.

State Uncertainty

The lack of predictability or knowledge regarding the future state of an environment or variables that might affect decision-making or outcomes.

Narrowly Defined Market

A market segment that is precisely delineated by specific characteristics, allowing for targeted marketing strategies.