A new project will cause accounts payable to increase by $35,000, accounts receivable to increase by $40,000 and inventory to decrease by $5,000 Which one of the following statements is true?

Question

Quizplus · Accepted Answer

Net working capital is calculated as current assets minus current liabilities. The increase in accounts receivable ($40,000) and the decrease in inventory (-$5,000) sum to a $35,000 increase in current assets. The increase in accounts payable ($35,000) is an increase in current liabilities. The changes in current assets and current liabilities offset each other, so net working capital remains unchanged.

A New Project Will Cause Accounts Payable to Increase by $35,000