A Corporation Is Considering Expanding Operations to Meet Growing Demand

question 108

Multiple Choice

A corporation is considering expanding operations to meet growing demand. With the capital expansion the current accounts are expected to change. Management expects cash to increase by $10,000, accounts receivable by $20,000, and inventories by $30,000. At the same time accounts payable will increase by $40,000, accruals by $30,000, and long-term debt by $80,000. The change in net working capital is ________.

• A) an increase of $10,000
• B) a decrease of $10,000
• C) a decrease of $90,000
• D) an increase of $80,000

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Definitions:

Overhead Expenses

costs related to the day-to-day running of a business but not directly tied to producing goods or services.

Selling Price

The amount of money for which a seller offers a product or service to the buyer.

Rate of Profit

A measurement, usually expressed as a percentage, reflecting the profitability of an investment or business compared to the initial cost.

Overhead Expenses

Indirect costs of a business that are not directly linked to a specific product or service, such as rent, utilities, and administrative expenses.