When a Portion of a Firm's Fixed Assets Are Financed

question 143

Multiple Choice

When a portion of a firm's fixed assets are financed with current liabilities, ________.

• A) the firm will have positive net working capital
• B) the net working capital will decrease
• C) the current ratio will increase
• D) the firm will have negative net working capital

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Definitions:

Fund Replenishing

The process of restoring the balance of a fund to its original level or to a desired level after it has been depleted.

Fund Shortages

A situation where the available financial resources are insufficient to cover the expected or required expenses.

Cash Equivalents

Short-term, highly liquid investments that are readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Money Market Accounts

Savings accounts that typically offer higher interest rates, with the balance usually accessible through checks or electronic transfers.