Positive working capital for a firm implies:
A) the firm has no short-term debt.
B) the firm has no seasonal cash flow needs.
C) that current assets are completely financed by current liabilities.
D) the firm has no long-term debt.
E) that current assets are partially financed by long-term debt and equity.

Question

Quizplus · Accepted Answer

Positive working capital means that the current assets of the firm are more than its current liabilities. This indicates that the firm has enough short-term resources to meet its obligations. The positive working capital can be achieved through the financing of current assets by long-term debt and equity. Therefore, option E is the best choice. Options A, B, and D are incorrect as they suggest that the firm has no short-term or long-term debt or seasonal cash flow needs which are not necessarily related to positive working capital. Option C is incorrect as positive working capital means that current assets are more than current liabilities, not that they are completely financed by current liabilities.

Positive Working Capital for a Firm Implies