CORPORATE FINANCE - LL+CONNECT ACCESS
12th Edition
ISBN: 9781264054961
Author: Ross
Publisher: MCG
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Chapter 26, Problem 7CQ
Summary Introduction
To explain: The net working capital is positive in real economy. As in ideal economy the net working capital is zero.
Net working capital:
The total amount of current assets and the current liability of the company is net working capital. The company can use working capital to fulfill the short term needs of the company. The company has high net working capital and it is considered as the growing company.
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2. What is the difference between Gross Working Capital and Net Working Capital? Explain your
answer (Essay)
a. How do we compute for Gross Working Capital?
b. How do we compute for the Net Working Capital?
c. When will negative working capital occur?
What exactly is negative working capital?
Why does net working capital appear with both negative andpositive values?
Chapter 26 Solutions
CORPORATE FINANCE - LL+CONNECT ACCESS
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- economic value added. EVA will be positive whenever ROC is positive and greater than the cost of capital. Explain why this is soarrow_forwardWhat is the basic idea of zero working capital, and how is workingcapital defined for this purpose?arrow_forwardWhat are the ramifications of having Working Capital?arrow_forward
- what is not a factor in producing earning forecasts?arrow_forwardBriefly explain why we refer to the opportunity cost of capital, instead of just “cost of capital” or “discount rate”arrow_forwardDiscuss the following components of break-even analysis: fixed costs, variable and semi-variable costs, and contribution margin. How does cash flows versus accounting flows affect break-even?arrow_forward
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