When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant)has which of the following effects on the working capital requirements?
A)increase
B)decrease
C)no effect
D)increase, decrease, or no effect, depending on other factors

Question

Quizplus · Accepted Answer

According to the Bardahl formula, working capital requirements are equal to cost of goods sold multiplied by the days of working capital minus accounts payable. Holding purchases and operating expenses constant, an increase in accounts payable would directly decrease the days of working capital, resulting in a decrease in the working capital requirements.

When Using the Bardahl Formula, an Increase in Accounts Payable