Which of the statements below is TRUE? A. The increase in working capital accounts necessary to support a project also provides for cost increases at the end of the project. B. Decreases in accounts payable constitute a source of cash flow because you are using your suppliers to help finance your business operations. C. An increase in working capital can be brought about by an increase in inventory. D. Decreases in accounts receivables constitute a use of cash flow because you are helping your customers finance their purchases.

C. An increase in working capital can be brought about by an increase in inventory.

Explanation:

A. The increase in working capital accounts necessary to support a project also provides for cost increases at the end of the project. False

If a project begins, the working capital is increased at the beginning due to additional resources and operations and are realized at termination of assets.

B. Decreases in accounts payable constitute a source of cash flow because you are using your suppliers to help finance your business operations. False

Decrease in the Accounts payable balance means that the company has paid more of its credit purchases than the purchases made for the month

Therefore, decrease in accounts payable is a source of cash outflow. Therefore, dues are paid back using cash in hand.

C. An increase in working capital can be brought about by an increase in inventory. True

Working capital is the capital of a business which is used in its day-to-day trading operations, calculated as the current assets minus the current liabilities. Therefore, an increase in working capital can be brought about by an increase in the amount of assets which is inventory.

D. Decreases in accounts receivables constitute a use of cash flow because you are helping your customers finance their purchases. False

The accounts receivable asset shows how much money customers who bought products on credit still owe the business; this asset is a promise of cash that the business will receive. Cash doesn’t increase until the business collects money from its customers. Therefore, decrease in accounts receivables is a source of cash flow with better ways of recovering cash from your customers.

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