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For a firm with the following info., what is the Net Working Capital? Prepaid expenses=$2 million,...

For a firm with the following info., what is the Net Working Capital?

Prepaid expenses=$2 million, Cash=$4 million, Accounts payable=$3 million, Long-term debt=$40 million, Equity=$10 million, Net property, plant and equipment=$35 million, Accounts receivable=$5 million, Inventory=$10 million. The firm also has some short-term bank loan outstanding (Notes Payable).

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Answer #1

Computation of short term bank loan.

Total Assets - Total Liabilities (excluding short term bank loan) - Common stock

[$2 million + $4 million + $35 million + $5 million + $10 million] - [$40 million + $3 million + $10 million]

Short term bank loan = $3 million

Net working Capital = Current Assets - Current Liabilities

Current Assets = $2 million + $4 million + $5 million + $10 million = $21 million

Current Liabilities = $3 million + $3 million = $6 million

Net working Capital = $21 million - $6 million

Net working Capital = $15 million.

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