Asked by Nathan Seifner on Jul 22, 2024
Verified
Working capital decreases when a company pays taxes payable.
Working Capital
The measure of a company's operational efficiency and short-term financial health, calculated as current assets minus current liabilities.
Taxes Payable
Liabilities due to local, state, or federal tax authorities within the upcoming fiscal period.
- Acknowledge the repercussions of liabilities on working capital and liquidity.
Verified Answer
AB
Andie BaughmanJul 27, 2024
Final Answer :
False
Explanation :
Working capital is calculated as current assets minus current liabilities. Paying taxes payable reduces both the cash (a current asset) and the taxes payable (a current liability) by the same amount, leaving working capital unchanged.
Learning Objectives
- Acknowledge the repercussions of liabilities on working capital and liquidity.
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