Question

A firm has net working capital of $3,000, long-term debt of

$10,500, total asset of $19,000, and fixed assets of $13,500. What
is the amount of shareholder's equity?

Answer 1

To find the total amount of shareholder's equity, subtract the firm's liabilities from the total assets.

The long-term debt is shown at $10,500

The net working capital is shown at $3,000

Networking capital is the difference between current assets and current liabilities.

Since we are not told the firm's current liabilities, we will assume that the networking capital represents current assets.

To find current liabilities, subtract the networking capital from total assets. $19,000 (total assets) - $3,000 (net working capital) = $16,000 (current liabilities)

Calculate the shareholder's equity by subtracting the liabilities from the total assets. $19,000 (total assets) - $10,500 (long-term debt) - $16,000 (current liabilities) = -$7,500.

Therefore the shareholder equity is -$7,500.

The negative would indicate that the firm has more liabilities than they do assets.