Which of the Following Statements About Net Working Capital (NWC)

question 36

Multiple Choice

Which of the following statements about net working capital (NWC) is correct?

• A)NWC is positive for all firms.
• B)as NWC decreases, potential liquidity increases.
• C)NWC excludes inventory, which is deemed illiquid.
• D)decrease in NWC can increase the firm's risk of bankruptcy.

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Definitions:

Engel Curve

A graph showing the relationship between income and expenditure on a particular good, illustrating how spending changes as income changes.

Normal Goods

Goods for which demand increases as consumer income increases, reflecting items that people buy more of as they become wealthier.

Income-Consumption Curve

A graphical representation showing how a consumer's optimal consumption changes in response to changes in income, holding prices constant.

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded for it.