Asked by Visionary April on Apr 24, 2024
Verified
Working capital increases when a company purchases equipment and signs a 2-year note payable.
Working Capital
The difference between a company's current assets and current liabilities, indicating the funds available for day-to-day operations.
Note Payable
A written promise to pay a specific sum of money to a creditor at a future date under specified terms.
- Understand the concept of working capital and its importance for short-term liquidity.
Verified Answer
YQ
Yaldar Qunash7 days ago
Final Answer :
False
Explanation :
Working capital is the difference between a company's current assets and current liabilities. Purchasing equipment would increase the company's fixed assets, which do not affect working capital. Signing a 2-year note payable would increase the company's current liabilities, decreasing working capital. Therefore, the statement is false.
Learning Objectives
- Understand the concept of working capital and its importance for short-term liquidity.