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Sticky Note
An increase in stock of Rs. 250, a decrease in bank balance of Rs. 400, and an increase in creditors of Rs. 1200 results in _____?
  1. An increase in working capital of Rs. 1,350
  2. A decrease in working capital of Rs. 1,350
  3. A decrease in working capital of Rs. 1,050
  4. None of these
Explanation

Working capital = Current Assets - Current Liabilities

  1. Increase in stock (Rs. 250)Increases current assets
  2. Decrease in bank balance (Rs. 400)Decreases current assets
  3. Increase in creditors (Rs. 1200)Increases current liabilities

Net impact on working capital:
(250 - 400 - 1200) = -1350

Thus, there is a decrease of Rs. 1,350 in working capital.

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