A firm’s balance sheets for year-end 2011 and 2012 contain the following data. A

Question

A firm’s balance sheets for year-end 2011 and 2012 contain the following data. All items are in millions of dollars.

Calculate the net working capital in 2011. (Enter your answer in millions rounded to 1 decimal place.)

Calculate the net working capital in 2012. (Enter your answer in millions rounded to 1 decimal place.)

What happened to investment in net working capital during 2012? (Input the amount as a positive value. Enter your answer in millions rounded to 1 decimal place.)

A firm’s balance sheets for year-end 2011 and 2012 contain the following data. All items are in millions of dollars.

Explanation / Answer

Net working capital = Accounts receivable + Inventory - Accounts payable

a.

Therefore, net working capital in 2011 = 32.8+25.8-12.8 = $45.8 million

b.

Therefore, net working capital in 2012 = 36.4+30.4-26.4 = $40.4 million

c.

Since net working capital has reduced from $45.8 million to $40.4 million therefore there is decrease in net working capital

Decrease by = $45.8-$40.4 = $5.4 million

Therefore, net working capital has decreased by $5.4 million.

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