A firm’s balance sheets for year-end 2016 and 2017 contain the following data. All items are...

A firm’s balance sheets for year-end 2016 and 2017 contain the following data. All items are in millions of dollars.

	Dec. 31, 2016		Dec. 31, 2017
Accounts receivable		33.0		36.5
Inventories		26.0		30.5
Accounts payable		13.0		26.5

What happened to investment in net working capital during 2017? (Enter your answer in millions.)

Expert Solution

Solution :

The Investment in Net Working Capital is calculated as follows:

Investment in Net working capital = Current assets - Current Liabilities

Calculation of Investment in Net Working Capital for Year 2016 :

Current assets = Accounts receivable + Inventories = 33 + 26 = 59 Million dollars

Curremt liabilities = 13 Million dollars

Thus Investment in Net Working Capital for Year 2016 = 46 Million Dollars

Calculation of Investment in Net Working Capital for Year 2017 :

Current assets = Accounts receivable + Inventories = 36.5 + 30.5 = 67 Million dollars

Current liabilities = 26.5 Million dollars

Thus Investment in Net Working Capital for Year 2017 = 40.5 Million Dollars

The Investment in Net working capital in year 2017 at 40.5 Million Dollars is less than that of the investment in Net working capital in 2016 of 46 Million Dollars.

Thus Investment in Net working capital has decreased in the Year 2017 when compared to that of the year 2016.

jeff jeffy answered 2 years ago

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