Scrapping Products is implementing a project that will initially increase accounts payable by $3,000, increase inventory by $1,800, and decrease accounts receivable by $1,200. All net working capital will be recouped when the project terminates. What is the cash flow related to the net working capital for the last year of the project?

Question

Business

Rylee Glover

11 September, 07:57

Scrapping Products is implementing a project that will initially increase accounts payable by $3,000, increase inventory by $1,800, and decrease accounts receivable by $1,200. All net working capital will be recouped when the project terminates. What is the cash flow related to the net working capital for the last year of the project?

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Answers (1)

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Dane Lane · Answer 1

Net working capital = - $2400

Explanation:

given data

accounts payable = $3,000

increase inventory = $1,800

decrease accounts receivable = $1,200

to find out

cash flow related to the net working capital

solution

we get here first net working capital that is express as

Net working capital = Total current assets - Total current liabilities ... 1

here

Total current assets = Increase in inventory - Decrease in accounts receivables ... 2

Total current assets = $1800 - $1200

Total current assets = $600

and total current liabilities is = $3000 so from equation 1 we get here

Net working capital = $600 - $3000

so Net working capital = - $2400