Which of the following represents a common reason for increases in net working capital with new projects?
A)inventory can now be held at lower levels
B)accounts receivable are often not paid on time
C)inventory increases more than accounts payable increase
D)accounts payable must be increased

Question

Quizplus · Accepted Answer

When a new project is undertaken, there is often an increase in inventory to support production and sales. At the same time, accounts payable may not immediately increase as the company takes advantage of trade credit terms. This leads to an increase in net working capital since inventory increases more than accounts payable.

Which of the Following Represents a Common Reason for Increases