If the initial current ratio for a ﬁrm is greater than one, then the sale of inventory (at book value) on
credit will decrease net working capital.

Question

Quizplus · Accepted Answer

The sale of inventory on credit will increase accounts receivable, which is a current asset, and therefore increase the current ratio. It may also increase cash, depending on the terms of the sale, which would also increase net working capital.

If the Initial Current Ratio for a ﬁRm Is Greater