Question

A firm has net working capital of $560. Long-term debt is $3,970, total assets are $7,390, and fixed assts are $3,910. What is the amount of the total liabilities?

Answer 1

The total liabilities of the firm are $10,800.

Step-by-step explanation:

To calculate the total liabilities of the firm, we need to subtract the firm's net worth from its total assets. Net worth is calculated by subtracting the long-term debt from the net working capital. In this case, the net working capital is $560 and the long-term debt is $3,970. Therefore, the net worth is $560 - $3,970 = -$3,410. To find the total liabilities, we subtract the net worth from the total assets. Total assets are $7,390 and the net worth is -$3,410. Therefore, the total liabilities are $7,390 - (-$3,410) = $7,390 + $3,410 = $10,800.