Which One of the Following Will Increase Net Working Capital

question 83

Multiple Choice

Which one of the following will increase net working capital? Assume that the current ratio is greater than 1.0.

• A)Using cash to pay a trade payables.
• B)Using cash to pay a long-term debt.
• C)Selling inventory at cost.
• D)Collecting a trade receivables.
• E)Using a long-term loan to buy inventory.

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Definitions:

Price-Taker Firm

A company that must accept the prevailing prices in the market of its products because its own activity does not affect market prices.

Short-Run Losses

Financial deficits that occur within a brief period and are typically seen as part of the normal business cycle or due to temporary challenges.

Fixed Cost

Expenses that do not change with the level of production or output within a certain range or period.

Variable Cost

Costs that vary directly with the level of production or output, such as materials and labor.