A company has current assets of $200,000 and current liabilities of $150,000.If they used cash to pay off some accounts payable what would the effect be on their working capital?
A)Their working capital would increase.
B)Their working capital would decrease.
C)Their working capital would stay the same.
D)The effect on the working capital would depend on the amount paid.

Question

Quizplus · Accepted Answer

Paying off accounts payable with cash decreases both current assets and current liabilities by the same amount, leaving working capital (current assets - current liabilities) unchanged.

A Company Has Current Assets of $200,000 and Current Liabilities