The Need to Manage Net Working Capital Arises Because

question 25

Multiple Choice

The need to manage net working capital arises because:

• A) Financial management is naturally broken into those areas.
• B) Shareholders want to ensure they receive dividend payments.
• C) there is a mismatch between the timing of cash inflows and cash outflows.
• D) the sum of current assets and current liabilities usually is zero.
• E) the capital structure pie is limited in size.

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Definitions:

Weighted Average Cost of Capital (WACC)

The average rate of return a company is expected to pay its security holders to finance its assets, weighted by the proportion of equity and debt in the company's capital structure.

Coupon Rate

The rate of interest a bond pays annually, expressed as a percentage of its nominal value.

Dividend Growth Rate

The annualized percentage rate of growth of a company’s dividend payout, indicating the stability and growth prospects of the company to investors.

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary based on income levels, types of income, and other factors.