Question

Mike's Fish Market is implementing a project that will initially increase accounts payable by $6,100, increase inventory by $2,800, and decrease accounts receivable by $1,300. 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:

The net working capital is -$4600.

Explanation:

Use the below formula to calculate net working capital:

Net working capital = Total current assets – Total current liability  

Total current liability = $6100

Total current asset =  increase in inventory –decrease in account reciveable  

Total current asset = $2800 – 1300

= $1500

Now, Net working capital = Total current assets – Total current liability  

Net working capital = $1500 – $6100

= - $4600

Thus, net working capital is -$4600.