Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A project that increased sales was accompanied by $60,000 increase in inventory, a $25,000 increase in trade accounts receivable, and a $18,000 increase in trade accounts payable. Assuming these amounts remain constant, by how much has net working capital changed? Is it an increase or decrease in NWC?
my solution = correct?
| Net Working Capital | |||||
| NWC= (current assets) -(current liabilities) | |||||
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NWC= (cash + cash equivalent) +( Marketable Investments)+ (trade accounts receivable) + (inventory) - (trade accounts payable)
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|||||
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an increase in NWC leads to a decrease of cash flow
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|||||
| Inventory | $60,000 | ||||
| Trade accounts receivable | $25,000 | ||||
| $85,000 | |||||
| trade accounts payable | -$18,000 | ||||
| change in NWC | $67,000 |
increase in NWC
|
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