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.

---

Definitions:

Junior Subsidiary

A subsidiary that ranks below other subsidiaries in claim on assets and earnings.

Parallel Payments

Transactions where payment is made through duplicating payment streams, allowing for simultaneous settlements in different currencies or systems.

Credit Scoring

A statistical analysis performed by lenders and financial institutions to assess a person's creditworthiness and determine the likelihood of loan repayment.

Consumer Credit

Loans extended to individuals for personal, family, or household purchases or expenses.