Question

Lola Corp. has shareholders' equity of $134,900. The company has a total debt of $125,900, of which 40 percent is payable in the next 12 months. The company also has net fixed assets of $196,435. What is the company's net working capital?

Answer 1

$14,005

Step-by-step explanation:

The formula to calculate the net working capital is:

Net working capital=Total current assets-total current liabilities

The current liabilities are the liabilities that the company has to pay in a year:

$125,900*0.4=$50,360

Then, to find the current assets you have the following formula for the assets in which you can isolate the current assets:

Assets=Current Assets+Noncurrent assets

Current Assets= Assets-Noncurrent assets

To be able to use this formula, you have to find the assets given that: assets = liabilities + shareholders' equity

Current Assets= ($125,900+$134,900)-$196,435

Current Assets=$260,800-$196,435

Current Assets=$64,365

Then, you can replace the values of the current assets and the current liabilities in the formula for the net working capital:

Net working capital=$64,365-$50,360=$14,005

According to this, the answer is that the company's net working capital is $14,005.