US CMA Part 2 · Chapter 1 · Question 15 of 15
Which of the following transactions will DECREASE a company's net working capital?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Purchasing manufacturing equipment for cash
Explanation
Buying equipment for cash reduces a current asset (cash) and increases a noncurrent asset, so working capital falls. Collecting a receivable swaps one current asset for another, and buying inventory on credit increases current assets and current liabilities equally, so neither changes working capital. Issuing long-term bonds for cash increases current assets without increasing current liabilities, so working capital rises.
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