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:

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.

Surplus Goods

Items in excess of what is needed, often resulting in stockpiles or discounted sales.

Transportation Costs

are expenses involved in moving goods or people from one location to another, including fuel, labor, and maintenance of vehicles.

Free Market Economy

An economic system based on supply and demand with minimal government intervention.