Which One of the Following Is a Situation Where a New

question 116

Multiple Choice

Which one of the following is a situation where a new project will require a cash investment in net working capital?

• A) Inventory levels will be reduced when the project is introduced.
• B) All sales related to the project will be cash sales to a subsidiary.
• C) The project will increase inventory more than accounts payable.
• D)The project will require additional inventory which will be financed by a supplier.

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Definitions:

Common Stock

A form of corporate equity ownership, a type of security that represents ownership in a corporation and a claim on a portion of its profits or losses.

Revenue

The overall income that a corporation gathers from the sales of merchandise or offering of services throughout a designated period.

Prepaid Insurance

An asset account that represents insurance payments made in advance of the coverage period, to be expensed as the insurance coverage is used up.

Accounts Payable

Money owed by a business to its suppliers shown as a liability on a company's balance sheet.