Which One of the Following Statements Concerning Net Working Capital

question 326

Multiple Choice

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

• A) The greater the net working capital, the greater the ability of a firm to meet its short-term obligations.
• B) The change in net working capital is equal to current assets minus current liabilities.
• C) Depreciation must be added back to current assets when computing the change in net working capital.
• D) Net working capital is equal to long-term assets minus long-term liabilities.
• E) Net working capital is a part of the operating cash flow.

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Definitions:

Dollar-Weighted

A method of calculating an investment's return that takes into account the time and amount of each cash flow.

Time-Weighted

A method used in finance to measure the performance of investments by calculating the compound growth rate of the investment over a specific period, regardless of external contributions or withdrawals.

Pension Fund

A type of investment pool established to manage and distribute retirement benefits for its members.

Risk-Adjusted

An evaluation measure that takes into account the level of risk involved in an investment to determine its true performance.