Question

Scrapping Products is implementing a project that will initially increase accounts payable by $3,000, increase inventory by $1,800, and decrease accounts receivable by $1,200. All net working capital will be recouped when the project terminates. What is the cash flow related to the net working capital for the last year of the project?

Answer 1

Answer:

Net working capital = - $2400

Explanation:

given data

accounts payable = $3,000

increase inventory = $1,800

decrease accounts receivable = $1,200

to find out

cash flow related to the net working capital

solution

we get here first net working capital that is express as

Net working capital = Total current assets - Total current liabilities    .................1

here

Total current assets = Increase in inventory - Decrease in accounts receivables     ................... 2

Total current assets = $1800 - $1200

Total current assets = $600

and total current liabilities is = $3000  so from equation 1 we get here

Net working capital = $600 - $3000

so Net working capital = - $2400