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Anvisha [2.4K]
3 years ago
7

A new project would require an immediate increase in raw materials in the amount $6,000. The firm expects that accounts payable

will automatically increase $2,000. How much must the firm expect its investment in net working capital to increase if they accept this project
Business
1 answer:
Monica [59]3 years ago
3 0

Answer:

<em>The project will increase the net working capital of the firm by $4000</em>

Explanation:

Net working capital measure how fast a company can convert its asset to cash, the networking capital can be obtained with the expression below;

net working capital (NWC) = current assets - current liabilities

Current asset = Increase in raw materials = $6,000

Current liabilities  = accounts payable increase =  $2,000

NWC= Increase in raw materials-increase in accounts payable

          =$6,000 -$2,000

           =$4000

Therefore this project will increase the net working capital of the firm by $4000

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