Question

Sunset, inc., has a book value of equity of $14,865. long-term debt is $8,675. net working capital, other than cash, is $2,315. fixed assets are $20,660 and current liabilities are $1,865. how much cash does the company have?

Answer 1

Balance sheet equation states that:

Assets, A = Liabilities, L + Equity, E => A=L+E

In the current case,
L = Long term debt + Current liabilities = $8,675+$1,865 = $10,540
E = $14,865

Therefore,
A = 14,865 +10,540 = $25,405

Now,
Current assets (excluding cash) = current liabilities+Net working capital, other than cash = $1,865+$2,315 = $4,180

Additionally,
A = Fixed assets+Current assets (excluding cash) + Cash

Therefore,
Cash = 25,405-20,660-4,180 =  $565