(SOLVED) Which of the following statements about working capital is correct? The conversion of current assets..In general, the more net working capital a firm has,

Question

6. Which of the following statements about working capital is correct?

A. When current assets of a firm exceed current liabilities, a firm is said to have negative net working capital.

B. When current assets of a firm are less than its total assets, a firm is said to have positive net working capital.

C. When current assets of a firm exceed its current liabilities, a firm is said to have positive net working capital.

7) The conversion of current assets ________.

A. from inventory to receivables to cash provides the cash used to pay current liabilities

B. from inventory to receivables to marketable securities provides the cash used to buy plant and equipment

C. from cash to receivables to inventory provides the cash used to pay non-current liabilities

D. from cash to receivables to inventory provides the cash used to repurchase stock

8) In general, the more net working capital a firm has, ________.

A. the greater its risk

B. the lower its risk

C. the less likely it is that creditors will lend to the firm

D. the lower its level of long-term funds

9) A firm purchased raw materials on account and paid for them after 30 days. The raw materials were used in manufacturing a finished goods sold on account 100 days after the raw materials were purchased. The customer paid for the finished good 60 days later. The firm's cash conversion cycle is ________ days.

A. 10

B. 70

C. 130

D. 190

10) Collateral is one of the five C’s of credit. What is meant by collateral?

A. the customer’s record of meeting past obligations.

B. the customer’s ability to pay the given credit, as judged in terms of financial statement analysis.

C. the customer’s debt relative to equity

D. the amount of assets the customer has available for use in securing credit.

Expert Solution Preview

6. Option C is correct

When current assets of a firm exceed its current liabilities, a firm is said to have positive net working capital

7. Option A is correct

The conversion of current assets from inventory to receivables to cash provides the cash used to pay current liabilities

8. Option...............