Question

What is the effect on a firm's net working capital if a new project requires a $30,000 increase in inventory, a $10,000 increase in accounts receivable, a $35,000 expenditure on machinery, and a $20,000 increase in accounts payable

Answer 1

$20,000 Increase

Step-by-step explanation:

Calculation for What is the effect on a firm's net working capital

Using this formula

Change in Net working capital=Increase in inventory+Increase in accounts receivable-Increase in accounts payable

Let plug in the formula

Change in Net working capital=$30,000 + $10,000 - $20,000

Change in Net working capital=$20,000 Increase

Therefore the effect on a firm's net working capital will be $20,000 Increase