Which one of the following will decrease a ﬁrm's net working capital?
A) an increase in the cash account balance
B) the payment of a receivable by a customer
C) the purchase of a ﬁxed asset using short-term debt
D) the acquisition of a building using long-term debt
E) the sale of inventory for cash

Question

Quizplus · Accepted Answer

The purchase of a fixed asset using short-term debt will decrease a firm's net working capital as it involves using current assets (short-term debt) to acquire a long-term asset (fixed asset). Net working capital is calculated as current assets minus current liabilities, and this transaction will lead to a decrease in current assets without a corresponding decrease in current liabilities.

Which One of the Following Will Decrease a ﬁRm's Net