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Working Capital Management

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Working Capital Management
True or False

1 .       U.S. companies typically invest less than $0.10 in working capital from each $1 of sales. [Hint]

 True
 False


2 .       Net working capital equals current assets plus current liabilities. [Hint]

 True
 False


3 .       Firms that hold more current assets are in general less liquid than firms that do not hold current assets. [Hint]

 True
 False


4 .       Firms that choose to increase liquidity usually incur reduced return on investment. [Hint]

 True
 False


5 .       In general, interest rates on short-term debt are higher than on long-term debt. [Hint]

 True
 False


6 .       Total assets will always be less than the sum of temporary, permanent, and spontaneous sources of financing. [Hint]

 True
 False


7 .       The greater a firm's reliance upon short-term debt or current liabilities in financing its assets, the greater the risk of illiquidity. [Hint]

 True
 False


8 .       Trade credit that is made available on demand from a firm's suppliers when the firm orders its supplies or inventory is also called permanent financing. [Hint]

 True
 False


9 .       The hedging principle states that assets of the firm not financed by spontaneous sources should be financed with temporary sources. [Hint]

 True
 False


10 .       Under the hedging principle, total assets are broken down into temporary and permanent asset investment categories. [Hint]

 True
 False




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