Which One of the Following Will Increase Net Working Capital

question 45

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 an accounts payable
• B) using cash to pay a long-term debt
• C) selling inventory at cost
• D) collecting an accounts receivable
• E) using a long-term loan to buy inventory

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Definitions:

Times Interest Earned Ratio

A financial metric that measures a company’s ability to meet its debt obligations by comparing its income before interest and taxes to its interest expenses.

Creditors

Individuals or institutions that lend money or extend credit to others, with the expectation of being paid back with interest.

Price-Earnings Ratio

The ratio for valuing a company that measures its current share price relative to its per-share earnings, widely used by investors to assess the market's valuation of a stock relative to its earnings performance.

Financial Statements

Reports that summarize the financial performance, position, and cash flows of a business for a specified period.