Question

You are considering adding a microbrewery onto one of your firm's already existing restaurants. This will entail an increase in inventory of $8000, an increase in accounts payable of $2500, and an increase in property, plant, and equipment of $40,000. All other accounts will remain unchanged. The change in net working capital resulting from the addition of the microbrewery is:_________.
a. 45500
b. 10500
c. 6500
d. 5500

Answer 1

Answer:

The answer is D.

Explanation:

Net working capital is the difference between the current assets and current liabilities of a business or firm( Net working capital = Current assets - current liabilities) Current assets

are cash or cash-like or other assets that can easily be turned to cash and they are less than a year. Exampless of Current assets are accounts receivable, inventory, cash etc.

Examples of Current Liabilities are accounts payable, loans of a year of less than a year.

So back to our formula:

Net working capital = Current assets - current liabilities

$8000 - $2500

$5,500.

Please note that property, plant and equipment (PPE) is a non-current asset.