A(n) ________ in current assets increases net working capital, thereby ________ the risk of insolvency.
A) decrease; increasing
B) increase; increasing
C) increase; reducing
D) decrease; reducing

Question

Quizplus · Accepted Answer

An increase in current assets increases net working capital, which is the difference between current assets and current liabilities. This increase in net working capital reduces the risk of insolvency, as it means the company has more liquidity and can meet its short-term obligations more easily. Therefore, the correct choice is C - increase in current assets reduces the risk of insolvency.

A(n) ________ in Current Assets Increases Net Working Capital, Thereby