A Firm Is Considering Changing Their Credit Terms

question 66

Multiple Choice

A firm is considering changing their credit terms. It is estimated that this change would result in sales increasing by $1,000,000. This in turn would cause inventory to increase by $150,000, accounts receivable to increase by $100,000, and accounts payable to increase by $75,000. What is the firm's expected change in net working capital?

• A) $325,000
• B) $250,000
• C) $175,000
• D) $1,175,000

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Definitions:

Language

A system of communication used by a particular community or country, involving the use of words in a structured and conventional way.

Thought

A mental process involving the manipulation of information to form ideas, make decisions, solve problems, or engage in creative processes.

Reciprocal

Involving a mutual exchange or relationship where both or all parties give and receive something of similar value.

Causality

The relationship between causes and effects, where one event (the cause) directly leads to the occurrence of another event (the effect).