Question

At the beginning of the year, a firm has current assets of 389 and current liabilities...

At the beginning of the year, a firm has current assets of 389 and current liabilities of 233. At the end of the year, the current assets were 427 and the current liabilities were 273. What is the change in net working capital?

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Answer #1
Solution:
Change in net working capital = -2
Working Notes:
Beginning Net Working Capital = Beginning Current assets - Beginning Current liabilities
= 389 - 233
= 156
Ending Net Working Capital = Ending Current assets - Ending Current liabilities
=427 - 273
= 154
Change in Net working capital = Ending Net working capital - Beginning Net working capital
= 154 - 156
= - 2
Notes: Change in net working capital is negative shows working capital is decreases during the year by 2
Which is due to not increment of current assets by same amount by which its current liabilities is increases.
Please feel free to ask if anything about above solution in comment section of the question.
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