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11 December, 13:55

JohnBoy Industries has a cash balance of $54,000, accounts payable of $134,000, inventory of $184,000, accounts receivable of $219,000, notes payable of $129,000, and accrued wages and taxes of $41,500. How much net working capital does the firm need to fund?

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  1. 11 December, 14:17
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    Answer:Net working capital = $152,500

    Explanation:

    Net working capital = CA - CL

    Where CA = Current Assets = Cash + Inventory + Accounts Receivable

    and CL = Current Liabilities = Account payable + Notes payable + accrued wages and taxes

    CA=$54, 000 + $184,000 + $ 219,000 = $457,000

    Current liabilities = Account payable + Notes payable + accrued wages and taxes

    CL = $134,000 + $129,000 + $41,500 = $304,500

    Net working capital = Current assets - Current liabilities

    Net working capital = $457,000 - $304,500 = $152,500

    Net working capital = $152,500
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