A firm’s balance sheets for year-end 2011 and 2012 contain the following data. A
ID: 2713451 • Letter: A
Question
A firm’s balance sheets for year-end 2011 and 2012 contain the following data. All items are in millions of dollars.
Calculate the net working capital in 2011. (Enter your answer in millions rounded to 1 decimal place.)
Calculate the net working capital in 2012. (Enter your answer in millions rounded to 1 decimal place.)
What happened to investment in net working capital during 2012? (Input the amount as a positive value. Enter your answer in millions rounded to 1 decimal place.)
A firm’s balance sheets for year-end 2011 and 2012 contain the following data. All items are in millions of dollars.
Explanation / Answer
a. Computation of Net working capital in 2011
Net working capital = Total assets - Total liabilities
Total Assets = Accounts receivable + Inventories
= 34 + 27 = 61
Total liabilities = Accounts payable
= 14
Net working capital = 61 - 14 =$ 47 millions
b. Computation of Net working capital in 2012
Total assets = Accounts receivable + Inventories
= 37+31 = 68
Total liabilities = Accounts payables
= 27
Net working capital = 68 - 27 = 41
C. Net working capital has decreased by $6 millions.
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