If a Firm Has Positive Net Working Capital, the Current

question 32

Multiple Choice

If a firm has positive net working capital, the current ratio is:

• A)greater than one
• B)less than one
• C)equal to one
• D)not enough information given to tell

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Definitions:

Capital Rationing

The process by which management plans, evaluates, and controls long-term capital investments involving fixed assets.

Investment Funds

Pooled funds from investors that are managed by professionals and invested in a diversified portfolio of assets to earn returns.

Capital Investment

Expenditure on assets that are expected to produce benefits over a long period, such as buildings, machinery, and equipment.

Internal Rate

Often referred to in the context of Internal Rate of Return (IRR), it represents the discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.