Question

JohnBoy Industries has a cash balance of $52,000; accounts payable of $119,000; inventory of $155,000; accounts receivable of $210,000; notes payable of $130,000; and accrued wages and taxes of $23,000. How much net working capital does the firm need to fund?

Answer 1

HI

Net working Capital for a firm = current asset- current liablities

here Cash balance, inventory, account rec. are current asset

account payable and accrued wages and taxes are current liabilities and if notes payable are short term and this will also count as curent liabilities. Lets assume here notes payable are current liablities

so current asset= 52000+155000+210000= $417,000

current liabilities= 119000+23000+130000= $272,000

Net working capital = 417000-272000

=$145,000

HEnce the net working capital needed for the firm is $145,000

Thanks