Which of the following statements is most correct?
A) Net working capital may be defined as current assets minus current liabilities. Any increase in the current ratio will automatically lead to an increase in net working capital.
B) Although short-term interest rates have historically averaged less than long-term rates, the heavy use of short-term debt is considered to be an aggressive strategy because of the inherent risks of using short-term financing.
C) If a company follows a policy of "matching maturities," this means that it matches its use of common stock with its use of long-term debt as opposed to short-term debt.
D) All of the statements above are correct.
E) None of the statements above is correct.

Question

Quizplus · Accepted Answer

While statement A is partially correct regarding the definition of net working capital, it is not necessarily true that an increase in the current ratio will always lead to an increase in net working capital. Statement C is incorrect as "matching maturities" typically refers to matching the maturity dates of assets and liabilities. Statement D is incorrect as only statement B is correct.

Which of the Following Statements Is Most Correct