Multiple Choice
Which of the following is a profit-oriented objective related to net sales?
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4. Merchandising Operations
Net Sales
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Which of the following is included in the calculation of working capital?
A
Accounts Receivable
B
Retained Earnings
C
Equipment (net of depreciation)
D
Long-term Debt
Verified step by step guidance1
Understand the concept of working capital: Working capital is calculated as Current Assets minus Current Liabilities. It represents the liquidity available to a business for day-to-day operations.
Identify which items in the problem are classified as Current Assets or Current Liabilities. Current Assets typically include items like Accounts Receivable, Cash, and Inventory, while Current Liabilities include items like Accounts Payable and Short-term Debt.
Analyze each option provided: Accounts Receivable is a Current Asset, Retained Earnings is part of equity and not included in working capital, Equipment (net of depreciation) is a long-term asset and not included, and Long-term Debt is a non-current liability and not included.
Focus on the inclusion criteria: Only items classified as Current Assets or Current Liabilities are included in the calculation of working capital. Exclude items that are part of equity, long-term assets, or non-current liabilities.
Conclude that Accounts Receivable is the only item from the list that is included in the calculation of working capital, as it is a Current Asset.
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