Positive Working Capital for a Firm Implies

question 52

Multiple Choice

Positive working capital for a firm implies:

• A) the firm has no short-term debt.
• B) the firm has no seasonal cash flow needs.
• C) that current assets are completely financed by current liabilities.
• D) the firm has no long-term debt.
• E) that current assets are partially financed by long-term debt and equity.

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Definitions:

Absorption Costing

An accounting approach that includes all manufacturing costs (both variable and fixed) in the cost of a product, used for external reporting.

Plantwide Overhead Rate

A single overhead rate calculated by dividing total factory overhead by the total amount of the allocation base used across the entire plant.

Direct Labor

Labor costs associated with employees who are directly involved in the production of goods or the provision of services.

Predetermined Overhead Rate

A rate used to assign overhead costs to products or services, calculated by dividing estimated overhead by an allocation base such as labor hours.