Question

You are considering adding a microbrewery on to one of your firm's existing restaurants. This will entail an increase in inventory of $8,000, an increase in Accounts payable of $2,500, and an increase in property, plant, and equipment of $40,000. All other accounts will remain unchanged. What the change in net working capital resulting from the addition of the microbrewery is?

Answer 1

Answer:

The change in net working capital resulting from the addition of the microbrewery is $5,500 (decrease)

Explanation:

There are 3 key elements of working capital. These are;

• Inventory
• Accounts payable
• Accounts receivable

Given;

increase in inventory = $8,000

increase in Accounts payable = $2,500

Change in net working capital resulting from the addition of the microbrewery = -$8,000 + $2,500

= -$5,500