A Small Company Has Current Assets of $112,000 and Current

question 91

Multiple Choice

A small company has current assets of $112,000 and current liabilities of $117,000. Which of the following statements about that company is most likely to be true?

• A) Since net working capital is negative, the company will not have enough funds to meet its obligations.
• B) Since net working capital is high, the company will likely have little difficulty meeting its obligations.
• C) Since net working capital is very high, the company will have ample money to invest after it meets its obligations.
• D) Since net working capital is nearly zero, the company is well run and will have little difficulty attracting investors.

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Definitions:

Invoice Payment

Invoice Payment refers to the process of paying off the amount owed for goods or services received, as documented by an invoice issued by the supplier or service provider.

Discount Period

The time period during which a payment can be made at a discounted rate before the full amount becomes due.

Credit for Returns

Refunds issued to customers or credits applied against customer accounts for returned goods or services.

Discount Period

The timeframe in which a buyer can pay less than the full invoice amount due to taking advantage of a sales discount offered by the seller for early payment.