The Caraway Seed Company grows heirloom tomatoes and sells thier seeds. The heir

Question

The Caraway Seed Company grows heirloom tomatoes and sells thier seeds. The heirloom tomato plants are preferred by many growers for thier superior flow. At the end of the most recent year the firm had current assets of $49,600, net fixed assets of $248,300, current liabilities of $28,700, and long-term debt of $99,900.
a. Calculate Caraway's stockholders' equity.
b. What is the firm's net working capital?
c. If Caraway's current liabilities consist of $20,700 in accounts payable and $8,000 in short-term debt (notes payable), what is the firm's net working capital?

Explanation / Answer

a.

Assets = Liabilities + Shareholders' equity

From the above equation, we get

49600 + 248300 = 28700 + 99900 + Equity

Therefore Equity = 169,300

b) Net working capital = current assets - current liabilities

Net working capital = 49600 - 28700 = 20,900

c) If current liabilities consist of 8,000 in notes payable, which is not a operating line item on Balance sheet, we have to ignore that from the calculation of net working capital

So Net working capital = 49600 - 28700 - 8000 = 12,900

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