Final answer:
An increase in annual credit sales, while holding the average accounts receivable balance constant, has no effect on the working capital requirements.The correct answer is option C.
Step-by-step explanation:
When using the Bardahl formula, an increase in annual credit sales (while holding the average accounts receivable balance constant) has no effect on the working capital requirements (Option C).
Working capital refers to the funds a company needs to finance its day-to-day operations and meet its short-term obligations. It is calculated by subtracting current liabilities from current assets. The Bardahl formula helps calculate the amount of working capital required based on credit sales and accounts receivable turnover.
An increase in annual credit sales, without any change in the average accounts receivable balance, means that the company is selling more on credit. However, as long as the average accounts receivable balance remains constant, there is no impact on the working capital requirements. This is because the increase in credit sales is offset by the decrease in accounts receivable turnover, resulting in no change in the overall working capital requirements.