Which of the following actions will result in an increase in NWC?
A)An increase in A/P that exceeds an increase in A/R.
B)A reduction in inventory.
C)A reduction in A/P plus a smaller reduction in A/R.
D)An increase in A/P and a smaller reduction in inventory.

Question

Quizplus · Accepted Answer

Net Working Capital (NWC) is calculated as Current Assets minus Current Liabilities. A reduction in A/P (a liability) and a smaller reduction in A/R (an asset) will result in a net increase in NWC because the decrease in liabilities is greater than the decrease in assets.

Which of the Following Actions Will Result in an Increase