Mason Company’s board of directors has determined 4 options to increase working capital next year. Option 1 is to increase current assets by $120 and ... Accounting MCQs | Accounting MCQs

Mason Company’s board of directors has determined 4 options to increase working capital next year. Option 1 is to increase current assets by $120 and decrease current liabilities by $50. Option 2 is to increase current assets by $180 and increase current liabilities by $30. Option 3 is to decrease current assets by $140 and increase current liabilities by $20. Option 4 is to decrease current assets by $100 and decrease current liabilities by $75. Which option should Mason choose to maximize net working capital?

Option 1.
Option 2.
Option 3.
Option 4.Show Result

Correct - Your answer is correct.

Wrong - Your answer is wrong.

Detailed Answer

Answer (A) is correct. Net working capital is the excess of current assets over current liabilities. An increase in current assets or a decrease in current liabilities will increase net working capital. Option 1 maximizes Mason Company’s net working capital, increasing it by $170 ($120 + $50).