Why Do Firms Need to Invest in Net Working Capital

question 11

Essay

Why do firms need to invest in net working capital?

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Definitions:

Market Period

A very short time frame in which the supply of a good is completely inelastic, meaning that the quantity cannot be changed in response to a change in price.

Perfectly Inelastic

A situation where quantity demanded or supplied does not change in response to any price change.

Industry Supply

The total quantity of a product or service that all firms in a particular market or industry are willing and able to sell at various price levels.

Increase in Demand

A situation where more consumers are willing and able to purchase a good or service at each possible price, leading to a shift in the demand curve to the right.