MINDTAP Assignment 15-Working Capital Management Due on Nov 27 at 11PM EST Attem
ID: 2791210 • Letter: M
Question
MINDTAP Assignment 15-Working Capital Management Due on Nov 27 at 11PM EST Attempts: Keep the Highest: 1. Calculating working capital Atlantic Northern Inc.'s CFO has decided to take a closer look at the firm's short-term assets and liabilities. Atlantic Northern Inc.'s balance sheet follows. Balance Sheet $110,000 $60,000 $130,000 $300,000 400,000 $285,000 $985,000 $175,000 Accounts payable Cash Accounts receivable Inventory Total current assets $95,000 Accruals $115,000 Notes payable Total current liabilities Long-term debt Total common equity Total liabilities and equity $385,000 Net plant and equipment Total assets $600,000 $985,000 The value of Atlantic Northern Inc.'s working capital is while its net working capital is The value of Atlantic Northern Inc.'s net operating working capital is Atlantic Northern Inc.'s current ratio is If Atlantic Northern Inc. decides to purchase inventory with long-term debt, its current ratio will O Type here to searchExplanation / Answer
The value of Atlantic Northern Inc’s working capital is $385000 , While its net working capital is $85000 (ie. Current Assets $385000 – Current Liabilities $300000) .
The value of Atlantic Northern Inc’s net operating working capital is = (Cash + Accounts Receivable + Inventories)
(Accounts Payable + Accrued Expenses) = (175000+95000+115000) – (110000+60000) = $215000
Atlantic Northern Inc’s current ratio is = Current Assets / Current Liabilities = 385000 / 300000 = 1.28.
If Atlantic Northern Inc. decides to purchase inventory with long-term debt, its current ratio will be = (175000 +95000) / 300000 = 0.90
In the given case, there exists a vast gap in the net working capital, so the best characteristics the firm’s policy of the financing assets is “Aggressive policy” because sometimes there exists great positive working capital and sometimes negative working capital position.
During the shaded portion in the graph,” the firm has excess capital to invest in cash or marketable securities. “ (being idle cash or cash equivalent lies with the firm during the shaded area).
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