Which of the Following Will Cause an Increase in Net

question 5

Multiple Choice

Which of the following will cause an increase in net working capital, other things held constant?

• A) A cash dividend is declared and paid.
• B) Merchandise is sold at a profit, but the sale is on credit.
• C) Long-term bonds are retired with the proceeds of a preferred stock issue.
• D) Missing inventory is written off against retained earnings.
• E) Cash is used to buy marketable securities.

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Definitions:

Income Statement

A financial statement that shows a company's revenues, expenses, and profit over a specific period, typically a quarter or year.

Net Operating Income

The profit a company makes from its operations, excluding non-operational revenues and expenses like interest and taxes.

Variable Costing

An accounting method that only includes variable production costs—material, labor, and overhead—in product cost calculations, excluding fixed costs.

Fixed Manufacturing Overhead

The sum of all production costs that do not change with the level of output, including salaries, rent, and utility expenses of a manufacturing facility.