Asked by Bryson Winder on Jun 28, 2024

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Holding all other variables constant, which of the following would DECREASE the Net Working Capital investment required on a project?

A) Allowing customers a shorter time to pay for purchases
B) Taking a longer time to pay suppliers
C) Reducing inventory levels
D) Both a & c
E) All of the above

Net Working Capital

Net working capital measures a company's short-term financial health, calculated as current assets minus current liabilities, indicating its ability to fulfill short-term obligations.

Inventory Levels

The quantity of goods and materials on hand that are available for sale or production processes in a company.

Pay Suppliers

The process of settling financial obligations to suppliers by providing them with the agreed-upon payment for goods or services purchased on credit.

  • Recognize the critical role that adjustments in working capital play in the evaluation of a project.
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CA
Charles AustriaJun 29, 2024
Final Answer :
E
Explanation :
Net Working Capital (NWC) is calculated as Current Assets minus Current Liabilities. Decreasing the time customers take to pay (A), taking longer to pay suppliers (B), and reducing inventory levels (C) all effectively reduce the amount tied up in working capital, thus decreasing the NWC investment required.