Which of the following statements is false? A) The main components of net working capital are cash, inventory, receivables, and payables. B) The firm's cash cycle is the average length of time between when a firm originally purchases its inventory and when it receives the cash back from selling its product. C) Working capital includes the cash that is needed to run the firm on a day-to-day basis. It does not include excess cash, which is cash that is not required to run the business and can be invested at a market rate. D) If the firm pays cash for its inventory, the firm's operating cycle is identical to the firm's cash cycle.
Which of the following statements is false? A) The main components of net working capital are cash, inventory, receivables, and payables. B) The firm's cash cycle is the average length of time between when a firm originally purchases its inventory and when it receives the cash back from selling its product. C) Working capital includes the cash that is needed to run the firm on a day-to-day basis. It does not include excess cash, which is cash that is not required to run the business and can be invested at a market rate. D) If the firm pays cash for its inventory, the firm's operating cycle is identical to the firm's cash cycle.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter10: Forecasting Financial Statement
Section: Chapter Questions
Problem 6QE
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26) Which of the following statements is false?
- A) The main components of net working capital are cash, inventory, receivables, and payables.
- B) The firm's cash cycle is the average length of time between when a firm originally purchases its inventory and when it receives the cash back from selling its product.
- C) Working capital includes the cash that is needed to run the firm on a day-to-day basis. It does not include excess cash, which is cash that is not required to run the business and can be invested at a market rate.
- D) If the firm pays cash for its inventory, the firm's operating cycle is identical to the firm's cash cycle.
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