Boyd\'s beach wear is adding a new product to its sales lineup. The firm will st

Question

Boyd's beach wear is adding a new product to its sales lineup. The firm will stock $22,000 inventory, which will be purchased on 30 days credit from its supplier. The firm will also invest $16,000 in accounts receivable and $54,000 in equipment. What amount should be included in the initial cost for networking capital Boyd's beach wear is adding a new product to its sales lineup. The firm will stock $22,000 inventory, which will be purchased on 30 days credit from its supplier. The firm will also invest $16,000 in accounts receivable and $54,000 in equipment. What amount should be included in the initial cost for networking capital

Explanation / Answer

Inventory = $22,000

Account payable = $22,000

Account receivables = $16,000

Equipment = $54,000

Working capital is calculated by current assets minus current liability. Where current assets includes Inventory, account receivables and current loiabilities includes account payables. Equipment cost is not comes under working capital.

Net Working capital = ($22,000 + $16,000) - $22,000

                                  = $16,000

Hence, Net Working Capital Company is $16,000

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