Use the table for the question(s)below.
-The above diagram shows a balance sheet for a certain company.If the company buys new property,plant and equipment today using its entire cash balance,what will its net working capital be?
A)-$10 million
B)$10 million
C)-$3 million
D)$40 million

Question

Use the table for the question(s)below. 
-The above diagram shows a balance sheet for a certain company.If the company buys new property,plant and equipment today using its entire cash balance,what will its net working capital be?
A)-$10 million 
B)$10 million 
C)-$3 million 
D)$40 million

Quizplus · Accepted Answer

Net working capital is calculated as current assets minus current liabilities. If the company uses its entire cash balance to buy new property, plant, and equipment, its current assets will decrease by the amount of the cash balance. Assuming the cash balance is $10 million, the net working capital will decrease by $10 million, resulting in a negative $10 million net working capital.

Use the Table for the Question(s)below