When Using the Bardahl Formula, an Increase in Accounts Payable

question 56

Multiple Choice

When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant) has which of the following effects on the working capital requirements?

• A)increase
• B)decrease
• C)no effect
• D)increase, decrease, or no effect, depending on other factors

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Definitions:

Depreciation

The systematic allocation of an asset's cost over its useful life, reflecting its decrease in value over time.

Periodic Depreciation Charge

A non-cash expense that allocates the cost of a tangible asset over its useful life on a regular basis.

Acquisition Fees

Fees associated with the process of acquiring another company, such as legal, consulting, and accounting fees.

Cost Basis

The original value of an asset for tax purposes, usually the purchase price, which is used to calculate capital gains or losses.