PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 30, Problem 2PS

Components of working capital* True or false?

  1. a. Companies with negative net working capital are usually in financial trouble.
  2. b. Principal payments on long-term debt are shown as current liabilities if due within the next 12 months.
  3. c. Accounts payable are usually a small fraction of the firm’s total liabilities.
  4. d. Accounts receivable are usually the largest category of current assets.
  5. e. Less profitable companies typically hold larger cash balances as a precautionary measure.
  6. f. Well-managed companies invest the majority of their excess cash in short-term securities. They avoid the risks of investing in long-term bonds.
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