What happens to a firm's net worth as it uses cash to repay accounts payable?
A) Net worth increases.
B) Net worth decreases.
C) Net worth remains constant.
D) Net worth decreases temporarily, until cash is replenished.

Question

Quizplus · Accepted Answer

Repaying accounts payable with cash reduces both the cash and the liabilities by the same amount, leaving the net worth (equity) unchanged.

What Happens to a Firm's Net Worth as It Uses