A decrease in ________ would increase net working capital. A) accounts payable B
ID: 2771528 • Letter: A
Question
A decrease in ________ would increase net working capital.
A) accounts payable
B) accounts receivable
C) cash
D) equipment
151) In general, the greater a firm's reliance upon short-term debt or current liabilities, the lower
the:
A) liquidity.
B) flexibility.
C) certainty of interest costs.
D) both A and C.
152) Within the context of working capital management:
A) as the firm increases its investment in working capital, there is a corresponding increase in its
profits.
B) current liabilities provide a flexible means of financing the firm's fluctuating needs for assets.
C) the use of current liabilities or short-term debt as opposed to long-term debt subjects the firm
to less risk of illiquidity.
D) all of the above.
Explanation / Answer
Net working capital = Current assets – Current liabilities.
Hence, if current liabilities decrease, net working capital will increase.
Therefore, correct option is (A)