Question

The Caraway Seed Company grows heirloom tomatoes and sells their seeds. The heirloom tomato plants are preferred by many growers for their superior flavor. At the end of the most recent year the firm had current assets of $50,600​, net fixed assets of $248,900​, current liabilities of $30,200​, and​ long-term debt of $98,900.

a. Calculate​ Caraway's stockholders' equity.

b. What is the​ firm's net working​ capital?

c. If​ Caraway's current liabilities consist of $20,100 in accounts payable and $10,100 in​ short-term debt​ (notes payable), what is the​ firm's net working​ capital?

Answer 1

Total Assets = Stockholders' equity + Total liabilities

Net working capital = Current assets - Current liabilities

a)

Total assets = Current assets + Non-current assets => 50,600 + 248,900 = $299,500

Total liabilities = Current liabilities + Long-term debt + Other non-current liabilities => 30,200 + 98,900 = $129,100

Stockholders' equity = Total Assets - Total liabilities => 299,500 - 129,100 = $170,400

b)

Net working capital = Current assets - Current liabilities = 50,600 - 30,200 => $20,400

c)

Net working​ capital will not change because Net working capital = Current assets - Current liabilities,. All the current assets and current liabilities will be included in the computation of net working capital.

So, Net working capital = $20,400

Note : the answer would have changed if the requirement was net operating working capital (which does not include debt in its computation).