Working capital is most likely to increase when(A) payments to trade payables are delayed

Working capital is most likely to increase when

(A) payments to trade payables are delayed

(B) the period of credit extended to customers is reduced

(C) fixed assets are sold

(D) inventory levels are increased

An entity’s current assets exceed its current liabilities (which include an overdraft). The entity pays a trade payable, taking advantage of a cash discount. What will be the effect of this transaction upon the entity’s working capital and on its current ratio?

 

 

Working capital

Current ratio

(A)

Constant

Decrease

(B)

Constant

Increase

(C)

Decrease

Decrease

(D)

Increase

Increase

Which ONE of the following transactions is most likely to affect the overall amount of working capital?

(A) Receipt of full amount of cash from a receivable

(B) Sale of a fixed asset on credit at its net book value

(C) Payment of a trade payable

(D) Purchase of inventory on credit