For project Z,year 5 inventories increase by $6,000,accounts receivable by $4,000,and accounts payable by $3,000.Calculate the increase or decrease in working capital for year 5.
A)increases by $5,000
B)decreases by $1,000
C)increases by $7,000
D)decreases by $7,000

Question

Quizplus · Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. In this case, the increase in inventories ($6,000) and accounts receivable ($4,000) means that current assets have increased by $10,000. The increase in accounts payable ($3,000) means that current liabilities have increased by $3,000. Therefore, the increase in working capital is $10,000 - $3,000 = $7,000.

For Project Z,year 5 Inventories Increase by $6,000,accounts Receivable by $4,000,and