For project Z, year-5 inventories increase by $6,000, accounts receivables by $4,000 and accounts payables by $3,000. Calculate the increase or decrease in working capital for year-5.
A) Increases by $6,000
B) Decreases by $4,000
C) Increases by $7,000
D) Decreases by $7,000

Question

Quizplus · Accepted Answer

Working capital = Current assets - Current liabilities. Year-5 inventories increased by $6,000, accounts receivables increased by $4,000, and accounts payables increased by $3,000. Therefore, the increase in working capital = ($6,000 + $4,000) - $3,000 = $7,000. Hence, the correct answer is C, i.e., Increases by $7,000.

For Project Z, Year-5 Inventories Increase by $6,000, Accounts Receivables