When Constructing a Pro Forma Statement, Net Working Capital Generally

question 19

Multiple Choice

When constructing a pro forma statement, net working capital generally:

• A) remains fixed.
• B) varies only if the firm is currently producing at full capacity.
• C) varies only if the firm maintains a fixed debt-equity ratio.
• D) varies only if the firm is producing at less than full capacity.
• E) varies proportionally with sales.

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Definitions:

Facility Role

The designated function or purpose of a particular building or area within a larger system, such as manufacturing, storage, or retail.

Economies of Scale

The cost advantage achieved when production becomes efficient, reducing the average cost per unit through increased production.

Facility Location Decisions

Facility location decisions involve choosing the geographical placement of operations, factories, or stores to optimize logistics and customer reach.

Tariffs

Taxes imposed by a government on imported or exported goods to regulate trade, increase revenue, or protect domestic industries.