A firm can reduce net working capital by substituting long-term financing, such as bonds, with short-term financing, such as a one-year notes payable.

Name: A firm can reduce net working capital by substituting long-term financing, such as bonds, with short-term financing, such as a one-year notes payable.
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Question

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Substituting long-term financing with short-term financing reduces the amount of current liabilities relative to current assets, thereby potentially reducing net working capital.

A Firm Can Reduce Net Working Capital by Substituting Long-Term