Which of the Following Transactions Will Cause Net Working Capital

question 170

Multiple Choice

Which of the following transactions will cause net working capital to decrease?

• A)Inventory is purchased on credit.
• B)The firm declares and pays a cash dividend.
• C)An account payable is paid with cash.
• D)Inventory is sold for cash.
• E)None of the above would cause net working capital to decrease.

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Definitions:

Common Stock

Equity ownership in a corporation, with voting rights and the potential for dividends.

Retained Earnings

The part of net profits not allocated for dividend distribution but held back by the firm for the purposes of reinvesting in its main business or settling debts.

Dividends Paid

The portion of a company's earnings that is distributed to its shareholders as a payment, typically in the form of cash or additional shares.

Statement of Stockholders' Equity

A financial document that shows changes in the value of shareholders' equity in the company over a specific period.