Which of the statements below is TRUE?
A)The increase in working capital accounts necessary to support a project also provides for cost increases at the end of the project.
B)An increase in working capital can be brought about by an increase in inventory.
C)Decreases in accounts receivables constitute a use of cash flow because you are helping your customers finance their purchases.
D)Decreases in accounts payable constitute a source of cash flow because you are using your suppliers to help finance your business operations.

Question

Quizplus · Accepted Answer

An increase in working capital can be brought about by an increase in inventory, as inventory is considered a current asset. The other statements are not true. Increases in working capital accounts do not automatically provide for cost increases at the end of the project; decreases in accounts receivables do not constitute a use of cash flow as they represent money owed to the business; decreases in accounts payable do not constitute a source of cash flow as they represent money owed by the business.

Which of the Statements Below Is TRUE