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.

Net working capital = Current assets – Current liabilities.

Hence, if current liabilities decrease, net working capital will increase.

Therefore, correct option is (A)

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