Question

You company is considering launching a new product that will increase inventory by $50,000 and increase accounts receivables by $23,000. What is the effect of these change in net working capital (NWC) on cash flow at the beginning of the project

Answer 1

Cash outflow of $73,000

Step-by-step explanation:

The computation of the impact of these changed in the net working capital is shown below:

= Increase in inventory + increase in account receivable

= $50,000 + $23,000

= $73,000

The $73,000 shows the outflow of the cash

We simply applied the above formula so that the correct value could come

And, the same is to be considered