Question

A business that has too little working capital can take what action?

• Reduce cash on hand
• Reduce credit to consumers 
• Increase inventory
• Increase short-term financing

Answer 1

Net Working Capital = Current Assets - Current Liabilities

When a business has little working capital they have to either increase current assets or decrease current liabilities

Option C Increase inventory. because increase in inventory will result in current assets thereby increasing working capital

Option A is incorrect as the reduction in cash will lead to decrease in working capital

Option B is incorrect as reduction in credit to customers will decrease the accounts receivable which will lead to decrease in working capital

Option D is incorrect as increase in short term financing will lead to decrease in working capital