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which of the following would increase the net working capital of a firm
A. cash collection of accounts receivable
B. refinancing of accounts payable with a 2 year bank loan
C. Payment to suppliers
D. — i was able to eliminate this choicethe correct answer is B – and i dont get this. even if the payables are refinanced by a medium term loan, will we stop showing payables in the balance sheet? i mean the figure for payables will remian, no?
A – that wont change the current assets as receivables turn into cash so no change
C – payment to suppliers will also simply decrease payables but increase overdraft , so no change
is my logic on A and C correct?
thanks
Your logic with regard to A and C is correct.
With regard to B, instead of the amount owing being shown as payables (which is part of working capital) it will appear as a non-current liability, which is not part of working capital.
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