Question

You are examining a company's balance sheet and find that it has total assets of $20,426, a cash balance of $2,154, inventory of $4,849, current liabilities of $5,701 and accounts receivable of $2,675. What is the company's net working capital?

Answer 1

The company's net working capital is calculated by subtracting its current liabilities ($5,701) from its total current assets ($9,678), resulting in a net working capital of $3,977.

Calculating Net Working Capital

The net working capital for a company is calculated by subtracting the current liabilities from the current assets. Based on the given information, the current assets, which include cash, inventory, and accounts receivable, amount to $2,154 (cash) + $4,849 (inventory) + $2,675 (accounts receivable) = $9,678. The current liabilities are given as $5,701. Therefore, the net working capital is $9,678 (current assets) - $5,701 (current liabilities) = $3,977.

The company's net working capital, which provides a snapshot of the company's short-term financial health and its ability to cover its short-term obligations, is $3,977.