Other things held constant, which of the following will cause an increase in working capital?
A) Cash is used to buy marketable securities.
B) A cash dividend is declared and paid.
C) Merchandise is sold at a profit, but the sale is on credit.
D) Long-term bonds are retired with the proceeds of a preferred stock issue.
E) Missing inventory is written off against retained earnings.

Question

Quizplus · Accepted Answer

Selling merchandise on credit increases accounts receivable, which is a component of working capital, thus increasing the overall working capital.

Other Things Held Constant, Which of the Following Will Cause