๐Ÿ“ข Too many exams? Donโ€™t know which one suits you best? Book Your Free Expert ๐Ÿ‘‰ call Now!

  • google app store apple app store
  • โœ–

      Question

      Company XYZ has purchased a new machinery to expand its

      production capacity. This purchase of Fixed Asset will _________
      A Increase the working capital Correct Answer Incorrect Answer
      B Decrease the working capital Correct Answer Incorrect Answer
      C Not affect the working capital Correct Answer Incorrect Answer
      D All of the above Correct Answer Incorrect Answer

      Solution

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

      Practice Next
      ask-question