Which one of the following will decrease the net working capital of a firm? Assume the current ratio is greater than 1.0.
A)selling inventory at cost
B)collecting payment from a customer
C)paying a payment on a long-term debt
D)selling a fixed asset for book value
E)paying a supplier for the purchase of an inventory item

Question

Quizplus · Accepted Answer

Paying a payment on a long-term debt will decrease the net working capital. Net working capital is calculated as current assets minus current liabilities. Paying a long-term debt reduces the current liabilities but does not affect the current assets, thus decreasing the net working capital.

Which One of the Following Will Decrease the Net Working