A Firm Starts Its Year with a Positive Net Working

question 3

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 might be positive,negative,or equal to zero.
• 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 will be negative.

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Definitions:

Domestic Corporation

A corporation that is incorporated under the laws of the country in which it is doing business.

Taxable Income

The portion of income subject to taxes after adjustments, deductions, and exemptions are applied to gross income.

FMV

The fair market value, or the price that property would sell for on the open market between a willing buyer and a willing seller.

Complete Liquidation

The process of closing a business by selling all assets, paying off creditors, and distributing any remaining assets to shareholders or owners.