What Is the Effect on Net Working Capital If the Corporation

question 56

Multiple Choice

What is the effect on net working capital if the corporation decides to increase their investment in inventory and pay for it with cash?

• A) Increase in NWC.
• B) Decrease in NWC.
• C) Depends on the amount of the investment.
• D) No effect.
• E) Depends on the amount of cash.

---

Definitions:

Equivalent Units

A concept in cost accounting used to express the amount of work done on partially finished goods, converted to a number of fully finished units.

Processing Department

A specific section within a manufacturing facility focused on a particular stage of production or processing activity, essential for completing the manufacturing of goods.

Weighted-Average Method

An inventory costing method that assigns a cost to inventory items based on the average cost of all similar items purchased or produced.

Equivalent Units

A concept in process costing that quantifies the amount of materials or labor required to complete a unit of production, adjusting for partial completion.