Which of the Following Statements Is FALSE

question 43

Multiple Choice

Which of the following statements is FALSE?

• A)The firm's cash cycle is the average length of time between when a firm originally purchases its inventory and when it receives the cash back from selling its product.
• B)If the firm pays cash for its inventory, the firm's operating cycle is identical to the firm's cash cycle.
• C)The main components of net working capital are cash, inventory, receivables and payables.
• D)Working capital includes the cash that is needed to run the firm on a day-to-day basis. It does not include excess cash, which is cash that is not required to run the business and can be invested at a market rate.

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Definitions:

Subsidiary

An entity that is controlled by a parent company, typically through ownership of a majority of its voting rights, enabling the parent to influence the subsidiary's operations and decisions.

Deferred Tax Assets

Financial items on a company's balance sheet that reduce future tax liability due to deductible temporary differences, carryforwards, and credits.

Consolidation

The process of combining the financial statements of a parent company with those of its subsidiaries, to present accounts as if the group were a single entity.

Adjustments

Changes made to preliminary financial statement figures to correct errors, account for prepayments, accruals, or to reflect a more accurate representation of the financial position.