A Firm's Net Working Capital Reflects the Amount of Funds

question 229

True/False

A firm's net working capital reflects the amount of funds required to support its day-to-day routine operations. The word net reflects the fact that the requirement is net of spontaneous financing.

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Definitions:

Permanent/Temporary

Refers to types of accounts in accounting, where permanent accounts show cumulative amounts that carry over to future periods, and temporary accounts are closed at the end of each period.

Normal Balance

The side (debit or credit) of an account on which increases to the account are recorded under double-entry accounting.

Financial Statement

A formal record of the financial activities and position of a business, person, or other entity.

Permanent/Temporary

distinguishes between accounts or actions that exist indefinitely (permanent) or for a specific duration (temporary).