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      Question

      Which of the following is an application of

      funds?
      A Decrease in working capital Correct Answer Incorrect Answer
      B Increase in cash balance Correct Answer Incorrect Answer
      C Increase in working capital Correct Answer Incorrect Answer
      D Increase in equity Correct Answer Incorrect Answer
      E Increase in liabilities Correct Answer Incorrect Answer

      Solution

      An increase in working capital is considered an application of funds because it reflects the use of financial resources to finance additional current assets, such as inventory and receivables.Β  This typically requires cash outflows, representing how the company has applied its funds.

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