2.5 Points Question 4 of 20 All else equal, which of the following will cause in
ID: 2783812 • Letter: 2
Question
2.5 Points Question 4 of 20 All else equal, which of the following will cause in increase in net operating working capital? O A. The firm sells 10,000 units of its product at a profit, but the sale is made on credit. B. The firm increases it cash dividend paid. ° C. The firm buys S200,000 in raw materials from one of its suppliers on credit. 0 D. The firm uses excess cash reserves to retire some O E. None of the above would cause an increase in net operating working capital. Reset Selection outstanding long-term bonds, and decreases its interest expense.Explanation / Answer
Working capital is defined as capital required for day to day operation of the business. working capital is calculated by current assets minus current liabilities. Items in current assets include Cash, Account receivables, Inventory, and other current assets. Current liabilities includes, Short term debt, account payables, and other current liabilities.
the firm sells 10,000 unit of its product at profit but sale is made on credit, so account receivables value incraese by total sales value. so current assets of company get increases but it will not affect current liability. So otal working capital will increase.
Option (A) is correct answer.
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