An increase in equipment financed by issuing bonds increases both the firm's earning capacity and its working capital.

Question

An increase in equipment financed by issuing bonds increases both the firm's earning capacity and its working capital.​

Quizplus · Accepted Answer

While an increase in equipment financed by issuing bonds may increase a firm's earning capacity by expanding its operational capabilities, it does not increase working capital. Working capital is calculated as current assets minus current liabilities, and issuing bonds increases long-term liabilities rather than affecting current assets or liabilities directly.

An Increase in Equipment Financed by Issuing Bonds Increases Both