For project A in year-2, inventories increase by $12,000 and accounts payable by $2,000. Calculate the increase or decrease in net working capital for year-2.
A) Decreases by $14,000
B) Increases by $14,000
C) Decreases by $10,000
D) Increases by $10,000

Question

Quizplus · Accepted Answer

Net working capital is calculated as current assets minus current liabilities. An increase in inventories (current assets) by $12,000 and an increase in accounts payable (current liabilities) by $2,000 results in a net increase in working capital of $10,000 ($12,000 - $2,000).

For Project a in Year-2, Inventories Increase by $12,000 and Accounts