Final answer:
When a firm acquires more short-term debt than assets, the ending net working capital can be positive, negative, or equal to zero. This situation is likely to result in an increase in accounts payable and a decrease in inventory. The statement that both accounts receivable and inventory decreased cannot be confirmed or denied based on the given information.
Step-by-step explanation:
When a firm acquires more short-term debt than it does short-term assets, it means that the ending net working capital might be positive, negative, or equal to zero. This is because net working capital is the difference between current assets and current liabilities, and if the firm acquires more debt than assets, it can result in a negative net working capital.
In this situation, it is likely that accounts payable increased and inventory decreased during the year. Accounts payable represent the amount the firm owes to its suppliers, and an increase indicates that the firm has taken on more debt in the form of unpaid bills. The decrease in inventory suggests that the firm has sold more goods or used up its inventory during the year.
The statement that the beginning current assets were less than the beginning current liabilities is incorrect because the question only states that the firm starts the year with positive net working capital, not specific values for current assets and liabilities.
The ending net working capital can be negative if the firm acquires more debt than assets, which is the case here. However, it is not necessarily always negative.
The statement that both accounts receivable and inventory decreased during the year cannot be confirmed or denied based on the given information.