The correct answer is A and C only Key Points Working Capital: The difference between a company's current assets, such as cash, accounts receivable (unpaid invoices from customers), and inventories of raw materials and completed goods, and its current liabilities, such as accounts payable, is known as working capital. Formula: Working Capital = Current assets - Current Liabilities Important Points (A) An increase in current assets increases working capital Let us consider an example: Let Current assets = 1,00,000 and Current Liabilities = 40,000 Working Capital = 1,00,000 - 40,000 = 60,000 Current Assets increases to 1,20,000 Working Capital = 1,20,000 - 40,000 = 80,000 Hence, increase in current assets increases working capital (C) An increase in current liabilities decreases working capital Let us consider an example: Let Current assets = 1,00,000 and Current Liabilities = 40,000 Working Capital = 1,00,000 - 40,000 = 60,000 Current Liabilities increases to 60,000 Working Capital = 1,20,000 - 60,000 = 40,000 Hence, an increase in current liabilities decreases working capital