1. Operating working capital will increase, which is a positive development.2. Operating working capital will decrease, which is a positive development.3. Operating working capital will increase, which is a negative development.4. Operating working capital will decrease, which is a negative development.WHICH ONE OF THE ABOVE CHOICES IS RIGHT?.--Answer1:dfadfasfdasfdasfdas.--Answer2:3. If your A/R and inventory go up, it means youre receiving less cash and spending more. If your A/P goes down, that means your spending cash to pay down credit. All of those things decrease operating capital (essentially, cash). While you dont want a bunch of money sitting in cash, its generally better to have more operating capital, not less..--Answer3:4 - A/P decreasing is the only listed item that will reduce cash. In this context this is a negative development..--Answer4:It almost sounds like a trick question, or at least one that can be viewed several different ways. As a business owner heres my take. A/C payable decreasing is always good. Inventory increasing is usually good. The only way it increases in most cases is if sales are up. A/C receivable is also usually good. An increase here doesnt necessarily mean money is not coming in. Instead it can mean money is still coming in, but since sales are up, the receivables are up, and more money is coming in. Give me #1.
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