Which One of the Following Will Increase Net Working Capital

question 55

Multiple Choice

Which one of the following will increase net working capital? Assume the current ratio is greater than 1.0.

• A)paying a supplier for a previous purchase
• B)paying off a long-term debt
• C)selling inventory at cost
• D)purchasing inventory on credit
• E)selling inventory at a profit on credit

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Definitions:

Process Costing

A costing method used in mass production where costs are assigned to processes or departments, not individual units.

Conversion Costs

The total expense required to convert raw materials into finished goods, including labor and overhead costs.

Process Costing

An accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process, to calculate the total cost of manufacturing a product.

Weighted-Average Method

An inventory costing method that calculates the cost of goods sold and ending inventory based on the average cost of all goods available for sale during the period.