If the initial current ratio for a firm is greater than one, then factoring receivable at 90% of their book value will decrease net working capital.

Question

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Factoring receivables at 90% of their book value will reduce the firm's accounts receivable and increase its cash balance. This will decrease the firm's net working capital, which is defined as the difference between current assets and current liabilities.

If the Initial Current Ratio for a Firm Is Greater