Question

At the beginning of the year, a firm has current assets of $16,200 and current liabilities of $13,280. At the end of the year, the current assets are $14,800 and the current liabilities are $14,210.
What is the change in net working capital?

a.$470

b.$50

c.$470

d.$2,330

e.$2,330

Answer 1

Answer:

e. - $2,330.

Explanation:

Working capital is calculated by subtracting total current liabilities of a company from its total current assets. This is the amount of capital which is used by the company in running day to day operations. Working capital is considered an important part in company's operating capital.

The net working capital is calculated by subtracting working capital at the end of year minus working capital at start of the year.

Working capital at start = Current Assets - Current Liabilities

Working capital at start : $16,200 - $13,280 = $2,920

Working capital at end = Current Assets - Current Liabilities

Working capital at end : $14,800 - $14,210 = $590

Net working capital = Working capital at year end - Working capital at start of year.

Net working capital = $590 - $2,920

Net working capital = - $2,330.