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5 July, 12:39

A&D Inc. is projecting the following increases and decreases over the next year: Inventory

- increase by $3 million Accounts receivable

- decrease by $2 million Accrued payroll taxes

- increase by $1 million Fixed assets

- increase by $5 million Long term debt

- increase by $4 million Revenues

- increase by $6 million As a result of its projections,

A&D Inc. can expect it's net working capital to:

a. increase by $7 million

b. Increase by $1 million.

c. Decrease by $1 million

d. Not change.

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Answers (1)
  1. 5 July, 14:28
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    The question is is properly formatted, find below question:

    A&D inc is projecting the following increases and decreases over the next year.

    Inventory - increases by $3 million

    accounts receivable - decrease by $2 million

    Accrued payroll taxes - increase by $1 million

    fixing assets - increase by $5 million

    long term debt - increase by $4 million

    revenues - increase by $6 million

    The correct option is D, not change

    Explanation:

    The change in net working capital=change in current assets - change n current liabilities

    change in current assets=increase in inventory-decrease in accounts receivable=$3 m-$2m=$1m

    Change in current liabilities=increase in payroll taxes=$1m

    Change in net working capital=$1m-$1m=$0

    The correct option is d, not change since the change in net working capital expected is $0

    Option C is wrong because that is change in both current assets and current liabilities respectively
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