Question

A corporation is considering expanding operations to meet growing demand. With the capital​ expansion, the current accounts are expected to change. Management expects cash to increase by​ $20,000, accounts receivable by​ $40,000, and inventories by​ $60,000. At the same time accounts payable will increase by​ $50,000, accruals by​ $10,000, and longdashterm debt by​ $100,000. The change in net working capital is​ ________.

Answer 1

Answer:

$60,000

Explanation:

The computation of change in net working capital is shown below:-

Change in net working capital = Increase in cash + Increase in accounts receivables + Increase in inventories - Increase in payable - Increase in accruals

= $20,000 + $40,000 + $60,000 - $50,000 - $10,000

= $120,000 - $60,000

= $60,000

Therefore for computing the change in net working capital we simply applied the above formula.