Question

For the current year sales are $1,400,000, current assets are $101,524, and current liabilities are $85,265. If sales are forecasted to increase 12% next year, and all current assets and current liabilities vary proportionally with sales (i.e. they are spontaneous items), what is the forecasted amount of net working capital next year?

Answer 1

The forecasted amount of net working capital next year is $18,210.08

Step-by-step explanation:

Present Total working capital = Current assets - current liabilities

=$101,524 - $85,265

=$16,259

Hence if sales, Current Asset and all Current Liability increase by 14%, Working Capital next year would be = $16,259 * (1+12%)

=16,259 * (1+0.12)

=16,259 * (1.12)

=$18,210.08