A Firm Starts Its Year with a Positive Net Working

question 24

Multiple Choice

A firm starts its year with a positive net working capital. During the year,the firm acquires more short-term debt than it does short-term assets. This means that:

• A) the ending net working capital will be negative.
• B) both accounts receivable and inventory decreased during the year.
• C) the beginning current assets were less than the beginning current liabilities.
• D) accounts payable increased and inventory decreased during the year.
• E) the ending net working capital can be positive, negative, or equal to zero.

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Definitions:

Liable

Subject to legal obligation, where an individual or entity is responsible for fulfilling certain duties or compensating for harm caused to others.

Conditions Precedent

Specific conditions that must be fulfilled before a contract or agreement becomes legally binding.

Negotiable Instrument

An official written promise to pay a specified amount of money, which can be demanded at any time or payable at an agreed upon time, identifying the payer on the document.

Secondary Liability

A legal responsibility whereby one party is held liable for the actions of a third party, typically in copyright or partnership cases.