A Firm with Zero Net Working Capital Has

question 23

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:

Flotation Costs

Costs associated with a company issuing new securities, such as fees for underwriting, legal assistance, and registration.

Cost of Capital

The essential profit rate that companies need to hit on their investments to uphold their value in the market and attract capital.

Capital Budgeting

The process a business undertakes to evaluate and select long-term investments that are consistent with the firm's goal of wealth maximization.