A Firm Is Considering a Project Which Would Increase Accounts

question 120

Multiple Choice

A firm is considering a project which would increase accounts receivable by $10,000, accounts payable by $35,000, and inventory by $30,001. Which of the following is true?

• A) Net working capital has increased.
• B) Sales will increase.
• C) Payments to creditors will slow.
• D) Net working capital has decreased.
• E) This is a net source of cash.

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Definitions:

Quarterly Payment

A payment or installment made once every three months.

Future Value

The value of an investment at a specific date in the future, accounting for factors like interest rates and time.

Effective Rate of Interest

The actual interest rate earned or paid on an investment or loan, considering the effects of compounding.

Rent-to-own Transaction

A leasing agreement that includes a clause allowing the lessee to purchase the leased item at the end of the lease term.