Rocket Corporation Entered into the Following Transactions: • the Accrual

question 55

Multiple Choice

Rocket Corporation entered into the following transactions: • The accrual of wages and salaries expense.
• The cash payment of a six-month note payable.
• The cash payment in advance for a one-year insurance policy.
Which of the following statements is correct with respect to determining Rocket's working capital? Assume that Rocket's operating cycle is four months.

• A)The accrual of wages and salaries expense decreases working capital.
• B)The cash payment on the note payable decreases working capital.
• C)The purchase of the insurance policy increases working capital.
• D)The cash payments for the note and insurance both decrease working capital.

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Definitions:

Inventory Turnover Rate

A measure of how many times a company's inventory is sold and replaced over a specific period, often used to assess efficiency.

Cost Of Goods Sold

The direct costs attributable to the production of the goods sold by a company.

Rate Of Return

The gain or loss on an investment over a specified period, expressed as a percentage of the investment's cost.

Investment

The allocation of resources, such as capital or time, in the expectation of generating an income or profit.