What typically increases a company's working capital?

Working capital is defined as the difference between a company's current assets and current liabilities. It serves as an essential measure of a company's short-term financial health and its efficiency in utilizing assets.

Increasing current assets directly contributes to an increase in working capital because working capital is calculated as current assets minus current liabilities. When current assets rise—whether through increased cash, inventory, or accounts receivable—it bolsters the company's available resources to cover short-term obligations. This enhancement in resources not only supports day-to-day operations but also provides liquidity for unforeseen expenses or opportunities.

The other options illustrate factors that would have the opposite effect on working capital. Increasing current liabilities would stretch the working capital thinner, while decreasing current assets would directly reduce the working capital figure. Decreasing long-term investments is more aligned with strategic financial decisions but does not directly influence working capital, as this metric is concerned only with short-term assets and liabilities.