Company which borrows $1 million long-term and invests the proceeds in inventory will see a $1 million increase in its net working capital.

Question

Quizplus · Accepted Answer

Net working capital is calculated by subtracting current liabilities from current assets. If a company borrows $1 million long-term and invests the proceeds in inventory, its current assets will increase by $1 million, leading to a corresponding increase in its net working capital.

Company Which Borrows $1 Million Long-Term and Invests the Proceeds