Managers must understand how transactions affect working capital
A)because GAAP does not allow companies with weak working capital to obtain loans.
B)because lenders often use this to assess a company's ability to meet current obligations.
C)so that management can avoid transactions that increase working capital.
D)in anticipation of meeting creditors guidelines before issuing new stock.

Question

Quizplus · Accepted Answer

Lenders often use working capital as an indicator of a company's ability to pay back current debts. Therefore, understanding how transactions affect working capital is important for management when making decisions about financing and meeting current obligations.

Managers Must Understand How Transactions Affect Working Capital