Question

Company XYZ has purchased a new machinery to expand its production capacity. This purchase of Fixed Asset will _________

Q: Answer-Company XYZ has purchased a new machinery to expand its production capacity. This purchase of Fixed...

Working capital is the difference between the capital assets and capital liabilities. The purchase of fixed assets can be done by 2 ways Cash payment this would reduce cash and therefore the current assets, thereby reducing the working capital Credit purchase this would increase the creditors and therefore the current liabilities, thereby again reducing the working capital.