A Firm with Zero Net Working Capital Has

question 40

Multiple Choice

A firm with zero net working capital has:

• A)No cash or marketable securities
• B)Insufficient inventories
• C)Excessive current liabilities
• D)A quick ratio of less than 1.0

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Definitions:

Manufacturing Overhead

The indirect costs related to manufacturing that are not directly tied to a specific product, such as factory rent or salary of supervisors.

Allocation Base

A measure or statistic used to distribute indirect costs to different products, services, or business units.

Labor Intensive

A process or industry that requires a large amount of labor to produce its goods or services, often resulting in higher labor costs.

Machine Intensive

A production process that heavily relies on machinery and equipment rather than manual labor for manufacturing goods or services.