Why is net working capital always zero in an ideal economy, but positive in the real economy?

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Why is net working capital always zero in an ideal economy, but positive in the real economy? Does this introduce any risks to a company?

Use the following information to answer Questions 12–15: In the last year, Power Assets Holdings Limited reduced its bill payments to 60 days from 82 days. The reason given was that the company wanted to ‘control costs and optimize cash flow’. The reduced payable period will be in effect for all of the company’s 4,000 suppliers.

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Corporate Finance

ISBN: 9780077173630

3rd Edition

Authors: David Hillier, Stephen A. Ross, Randolph W. Westerfield, Bradford D. Jordan, Jeffrey F. Jaffe

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