Question

A&D Inc. is projecting the following increases and decreases over the next year: Inventory

- increase by $3 million Accounts receivable
- decrease by $2 million Accrued payroll taxes
- increase by $1 million Fixed assets
- increase by $5 million Long term debt
- increase by $4 million Revenues
- increase by $6 million As a result of its projections,
A&D Inc. can expect it's net working capital to:
a. increase by $7 million
b. Increase by $1 million.
c. Decrease by $1 million
d. Not change.

Answer 1

The question is is properly formatted ,find below question:

A&D inc is projecting the following increases and decreases over the next year.

Inventory - increases by $3 million

accounts receivable - decrease by $2 million

Accrued payroll taxes - increase by $1 million

fixing assets - increase by $5 million

long term debt - increase by $4 million

revenues - increase by $6 million

The correct option is D,not change

Step-by-step explanation:

The change in net working capital=change in current assets - change n current liabilities

change in current assets=increase in inventory-decrease in accounts receivable=$3 m-$2m=$1m

Change in current liabilities=increase in payroll taxes=$1m

Change in net working capital=$1m-$1m=$0

The correct option is d,not change since the change in net working capital expected is $0

Option C is wrong because that is change in both current assets and current liabilities respectively