Question

Assets Liabilities

Current Assets Current Liabilities
Cash 46 Accounts payable 39
Accounts receivable 23 Notes payable/short-term debt 5
Inventories 20
Total current assets 89 Total current liabilities 44
Long-Term Assets Long-Term Liabilities
Net property, plant, and equipment 121 Long-term debt 133
Total long-term assets 121 Total long-term liabilities 133
Total Liabilities 177
Stockholders' Equity 33
Total Assets 210
Total Liabilities and Stockholders' Equity 210
The above table shows a balance sheet for a certain company. All quantities shown are in millions of dollars.
Required:
1. What is the net working capital for the above company?
2. If the company pays back all of its accounts payable today using cash, what will its net working capital be (in million of USDs)?3. If the company buys new property, plant and equipment today using its entire cash balance, what will its net working capital be (in million of USDs)?

Answer 1

1. What is the net working capital for the above company?

Net Working Capital will be 45

2. If the company pays back all of its accounts payable today using cash, what will its net working capital be (in million of USDs)?

Net Working Capital will be 45

3. If the company buys new property, plant and equipment today using its entire cash balance, what will its net working capital be (in million of USDs)?

Net Working Capital will be -1

Step-by-step explanation:

1.

Net Working Capital = Total Current Asset - Total Current Liabilities

Net Working Capital = 89 - 44 = 45

2.

Current Asset after payment = 89 - 39 = 50

Current Liabilities after payment = 44 - 39 = 5

Net Working Capital = Total Current Asset - Total Current Liabilities

Net Working Capital = 50 - 5 = 45

3.

Current Asset after Purchase = 89 - 46 = 43

Current Liabilities after Purchase = 44 - 0 = 44

Net Working Capital = 43 - 44 = -1