Question

An increase in sort term investments of €450, a decrease in cash deposits of €600 and...

An increase in sort term investments of €450, a decrease in cash deposits of €600 and an increase in creditors of €1,300 will result in:

Select one:

a. an increase in working capital of €1,900

b. a decrease in working capital of €1,450

c. a decrease in working capital of €1,050

d. a decrease in working capital of €1,900

e. an increase in working capital of €1,300

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Homework Answers

Answer #1

b. a decrease in working capital of €1,450

Workings

Formula : Working capital = Current asset - Current Liabilities

Amount
Increase in Current Asset :Short term Investment €450
Less:Decrease in Current Asset : Cash -€600
Less: Increase in Current Liabilities: Creditors -€1300
Decrease in working capital -€1,450

Note : Total of decrease in current asset and increase in current liabilites (both have negative impact on working capital) is more than increase in current asset.(which has positive impact on working capital).Then the result is neagtive.

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