Profit-Making Firms Are About Creating Value

question 39

Multiple Choice

Profit-making firms are about creating value:

• A)this value is simply the profit generated at the end of the year.
• B)they must create value for several stakeholder groups if this is to result in sustainable long-term profit generation.
• C)value to some stakeholders (e.g. customers)may be difficult to quantify in money terms.
• D)both c and b.

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Definitions:

Long-Term Debt

Debt with a maturity of more than one year, used to finance or capitalize lasting investments.

Recoveries of Net Working Capital

The process of reclaiming cash invested in net working capital components, such as accounts receivable, and reducing accounts payable.

Operating Cash Flow

The amount of cash generated by a company's normal business operations, used to assess the company's ability to generate sufficient positive cash flow to maintain and grow its operations.

Net Working Capital

Net working capital is a measure of a company's liquidity, operational efficiency, and short-term financial health, calculated as current assets minus current liabilities.