Starrs Company has current assets of $300,000 and current liabilities of $200,000. Which of the following transactions would increase its working capital?
A) Prepayment of $50,000 of next year's rent
B) Refinancing $50,000 of short-term debt with long-term debt
C) Acquisition of land valued at $50,000 by issuing new common stock
D) Purchase of $50,000 of marketable securities for cash

Question

Quizplus · Accepted Answer

Refinancing $50,000 of short-term debt with long-term debt increases working capital because it reduces current liabilities without affecting current assets.

Starrs Company Has Current Assets of $300,000 and Current Liabilities