What does an increase in current assets generally do to working capital?

An increase in current assets typically leads to an increase in working capital because working capital is defined as the difference between current assets and current liabilities. Current assets include cash, inventory, accounts receivable, and other assets expected to be liquidated or used within one year. When current assets rise, it implies that the organization has more resources that can be immediately converted to cash or are expected to be realized as cash in the short term.

This increased asset base enhances the company's liquidity position, allowing it to better meet short-term obligations, invest in opportunities, and sustain operations effectively. Therefore, with current assets growing while current liabilities remain constant or don't increase proportionally, the overall working capital increases, providing a stronger financial positioning for the organization.

Other options such as having no effect on working capital or affecting it in varying degrees depending on liabilities do not capture this fundamental relationship between current assets and working capital accurately.