The Change in Net Working Capital-Regardless of Whether an Increase

question 16

True/False

The change in net working capital-regardless of whether an increase or decrease-is not taxable because it merely involves a net buildup or net reduction of current accounts.

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Definitions:

Financing Activities

Activities reported in the statement of cash flows that illustrate changes in the size and composition of the equity and borrowings of a company.

Bonds Issued

Long-term debt securities issued by corporations or governments to raise funds, promising to pay back with interest.

Statement of Cash Flows

A financial document summarizing the total cash inflows from operational activities and external investments a company gets, alongside the cash outflows for business operations and investments over a specific period.

Sale of Equipment

This transaction involves disposing of business equipment, typically recorded as a gain or loss in the financial statements, depending on the sale price versus book value.