Which of the following will increase working capital?
A) Purchasing inventory on credit
B) Payment of accounts payable
C) Cash sales
D) Purchasing office furniture with cash

Question

Quizplus · Accepted Answer

Working capital is current assets less current liabilities. Sales made for cash will increase current assets and increase sales, thus increasing working capital. Purchase of a office furniture with cash will decrease cash and increase furniture, thus decreasing working capital. The remaining two transactions have no net effect on working capital. Purchasing inventory on credit has a net effect of zero on current assets. Payment of accounts payable decreases current assets and current liabilities by the same amount.

Which of the Following Will Increase Working Capital