Firm A is based and operates in a country where financial markets are well developed.In this market long terms loans (from banks or through the issuance of bonds) are available and normally used by business entities as their source of external long-term funds.Firm B is based and operates in a country where the financial markets are not well developed.In this market is it commonplace for banks to offer,year after year,revolving short-term loans to their trusted customers.Assuming that both firms are identical in all aspects save for their external financing (Both firms' shareholders' equity equals a third of their total assets) ,how do their working capital need (WCN) compare? Which of the combinations shown below is highly improbable?
A) If A has a positive WCN,B is likely to have a positive WCN
B) If A has a positive WCN,B is likely to have a negative WCN
C) If A has a negative WCN,B is likely to have a positive WCN
D) If A has a negative WCN,B is likely to have a negative WCN
Correct Answer:
Verified
Q2: Having a negative working capital need is
Q3: Firms who fear their capital structure indicates
Q4: Two firms are completely identical in all
Q5: How is the working capital calculated?
A) Working
Q6: Balmer Company sells manufactured products for a
Q7: If a firm faces short-term financing difficulties
Q8: Which of the following four types of
Q9: How is the net cash calculated?
A) Bank
Q10: Acme Company sells manufactured products for a
Q11: How does one describe the way a
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents