Question

Company X's current assets increased by $40 million from 2007 to 2008, while the company's current liabilities increased by $25 million over the same period. The cash impact of the change in working capital was:
a. A decrease of $15 million
b. An increase of $15 million
c. An increase of $40 million
d. An increase of $25 million

Answer 1

Answer:

b. An increase of $15 million

Explanation:

The computation of the cash impact of the change in working capital is shown below:

As we know that

Working capital = Current assets - current liabilities

So, the change in working capital is

= Increase in current assets  - increased in current liabilities

= $40 million - $25 million

= $15 million

Hence, the b option is correct