Indicate which of the following four statements are right or wrong:
a. Because working capital requirement (WCR) = net long-term financing (NLF) + net short-term financing (NSF), I can reduce my investment in the operating cycle by either reducing my long-term financing through the repurchase of shares or by borrowing less on short-term basis
b. The lower my WCR, the more liquid my business unit is. One way to reduce WCR is to reduce inventories. I can do that by writing down some of my obsolete inventories
c. Although I can improve my liquidity or acid test ratios by letting my customer pay later, the result would be a decrease in the liquidity of my business unit
d. If I decrease my WCR, I will increase my cash holdings and be able to borrow less from my bank. But my bank, which makes money by lending funds, will be unhappy

  • CreatedMarch 27, 2015
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