IMANET Exam CMA Topic 5 Question 112 Discussion

Actual exam question for IMANET's CMA exam

Question #: 112
Topic #: 5

[All CMA Questions]

The Herb Salter Corporation is considering a plant expansion that will increase its sales and net income. The following data represent management's estimate of the impact the proposal will have on the company:

The effect of the plant expansion on Salter's networking capital will be a (n)

AIncrease of $240,000

BDecrease of $10,000

CIncrease of $230,000

DIncrease of $10,000

Show Suggested Answer

Suggested Answer: B

Net working capital is defined as current assets minus current liabilities; Net working capital is calculated as follows:

Networking capital decreases by $10,000 from the current $540,000 to $530,000 under the proposal.

by Frederica at Jun 14, 2025, 01:27 AM

Limited Time Offer

25%

7 days ago

If the plant expansion increases sales and net income, it seems logical that it would also increase the company's networking capital. I'm going with option C.

upvoted 0 times

...