A Company That Borrows $1 Million Long Term and Invests

question 44

True/False

A company that borrows $1 million long term and invests the proceeds in inventory will see a $1 million increase in its net working capital.

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Definitions:

Idle Capacity

Resources available for use that are not currently being utilized in the production process.

Minimum Acceptable Price

The lowest price at which a seller agrees to sell a product or service, often determined by costs or market conditions.

Excess Capacity

The additional production capability that a business can utilize without incurring additional fixed costs, often seen as an opportunity for growth.

Minimum Price

The lowest price at which a product or service can be sold, often determined by covering at least the costs of production or market regulations.