Which of the Following Actions Will Cause a Firm's Net

question 32

Multiple Choice

Which of the following actions will cause a firm's net working capital to decrease?

• A) The firm relaxes its credit policy.
• B) The firm increases its usage of accruals.
• C) The firm pays off a short-term bank loan with cash.
• D) None of the options will cause a firm's net working capital to decrease.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials and labor costs.

Work in Process Inventory

Goods that are partially completed in manufacturing but not yet ready for sale, reflecting a stage between raw materials and finished goods.

Supplies Inventory

Items held in stock by a business, such as office supplies or maintenance materials, not directly used in manufacturing but necessary for operations.

Factory Overhead

All indirect costs associated with manufacturing, excluding direct materials and direct labor.