Question

What is the effect on a firm's net working capital if a new project requires a $30,000 increase in inventory, a $41,000 increase in accounts receivable, a $43,000 increase in machinery, and a $31,000 increase in accounts payable?

Answer 1

$40,000

Step-by-step explanation:

As we know that net working capital is

Net working capital = Current assets - current liabilities

where,

Current assets = Increase in inventory + increase in account receivable

= $30,000 + $41,000

= $71,000

And, the current liabilities

= Increase in account payable

= $31,000

So, the effect on the firm net working capital is

= $71,000 - $31,000

= $40,000