What Is Permanent Working Capital

question 88

Multiple Choice

What is permanent working capital?

• A) the amount that a firm must keep invested in its short-term assets to support its continuing operations
• B) the difference between the actual level of investment in short-term assets and the amount that a firm must keep invested in its short-term assets to support its continuing operations
• C) the amount that a firm keeps invested in its short-term assets to support its continuing operations which are financed by short-term debt
• D) the amount that a firm keeps invested in its short-term assets to support its continuing operations which are financed by long-term debt

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Definitions:

CPI

Consumer Price Index, a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, used to assess price changes associated with the cost of living.

Salary

A fixed regular payment, typically paid on a monthly or biweekly basis by an employer to an employee, especially a professional or white-collar worker.

Real Interest Rates

The rate of interest an investor expects to receive after allowing for inflation, reflecting the true cost of borrowing and the true yield on savings.

Nominal Interest Rates

The stated rate of interest on a loan or investment, not adjusted for inflation.