Starrs Company has current assets of $400,000 and current liabilities of $300,000. Starrs could increase its net working capital by the
Accounting MCQs | Accounting MCQs

Starrs Company has current assets of $400,000 and current liabilities of $300,000. Starrs could increase its net working capital by the

Prepayment of $50,000 of next year’s rent.
Refinancing of $50,000 of short-term debt with long-term debt.
Acquisition of land valued at $50,000 through the issuance of common stock.
Purchase of $50,000 of trading securities for cash.Show Result

Correct - Your answer is correct.

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Detailed Answer

Answer (B) is correct. Net working capital is defined as the excess of current assets over current liabilities. Refinancing short-term debt with long-term debt decreases current liabilities with no effect on current assets, resulting in an increase in working capital.