Answer:
a. What is the firm’s net income in February?
net income = revenue - costs = $2,000,000 - $1,000,000 (only cost given) = $1,000,000
b. What is its net income in March?
$0, the company didn't sell anything during March
c. What is the firm’s net new investment in working capital in January?
net working capital = current assets - current liabilities = $1,000,000 (inventory) - $1,000,000 (accounts payable) = $0
d. What is its net new investment in working capital in April?
net working capital = current assets - current liabilities = $0
It changed accounts receivables for cash, they are both current assets.
e. What is the firm’s cash flow in January?
$0, it didn't pay anything during January
f. What is the firm’s cash flow in February?
$0, it didn't pay anything during February
g. What is the cash flow in March?
-$1,000,000 since it paid its accounts payable during March
h. What is the cash flow in April?
$2,000,000 since it collected its accounts receivables during April
