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he term working capital refers to current assets. You can think of those assets as capital that works throughout the year. The term net often
he term "working capital" refers to current assets. You can think of those assets as capital that works throughout the year. The term "net" often refers to cases when costs or other items, like liabilities) are subtracted out. So Net Working Capital represent Current Assets net of Current Liabilities. Solve for the net working capital below by following three steps
- Consider a firm with $504 in Cash, $2,851 in Accounts Receivable, $5,805 in Inventory, $9,398 in Property, Plant and Equipment. Calculate the Current Assets of the firm
- (be careful about what is included in Current Assets)
- The same firm has $107 in Accurals, $515 in Accounts Payable, $4,228 in Notes Payable, $8,428 in Long term Debt and $3,825 in Retained Earnings. Calculate the Current Liabilities of the firm
- (be careful about what is included in Current Liabilities)
- Now that you have Current Assets and Current Liabilites, use the formula from Section 3-2A to find Net Working Capital
- Net Working Capital = Current Assets - Current Liabilities
- Include your asnwer in dollars with no decimal example ($5040 or 5040 are both acceptable notation)
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