What is permanent working capital?
A) the amount that a firm must keep invested in its short-term assets to support its continuing operations
B) the difference between the actual level of investment in short-term assets and the amount that a firm must keep invested in its short-term assets to support its continuing operations
C) the amount that a firm keeps invested in its short-term assets to support its continuing operations which are financed by short-term debt
D) the amount that a firm keeps invested in its short-term assets to support its continuing operations which are financed by long-term debt

Question

Quizplus · Accepted Answer

Permanent working capital refers to the minimum level of investment a firm must keep in its short-term assets to support its ongoing operations. This investment is typically funded by long-term sources of financing and is a necessary component of a firm's overall working capital management strategy. Therefore, permanent working capital is not the difference between the actual level of investment in short-term assets and the amount required to support ongoing operations, nor is it necessarily financed by short-term or long-term debt.

What Is Permanent Working Capital