Question

Canyon Tours showed the following components of working capital last year:

	Beginning of Year			End of Year
Accounts receivable	$	27,600		$	24,800
Inventory		13,800			16,100
Accounts payable		16,300			20,100

   

a. What was the change in net working capital during the year? (A negative amount should be indicated by a minus sign.)

b. If sales were $37,800 and costs were $25,800, what was cash flow for the year? Ignore taxes.

Answer 1

(a)-Change in net working capital during the year

Working capital at the beginning

Working capital at the beginning = Total current assets - Total current liabilities

Working capital at the beginning = [Accounts receivables + Invenory] - Accounts payable

Working capital at the beginning = $27,600 + $13,800 - $16,300

Working capital at the beginning = $25,100

Working capital at the Ending

Working capital at the Ending = Total current assets - Total current liabilities

Working capital at the Ending = [Accounts receivables + Invenory] - Accounts payable

Working capital at the Ending = $24,800 + $16,100 - $20,100

Working capital at the Ending = $20,800

Therefore, the Changes in Working Capital = Working capital at the Beginning - Working capital at the Ending

Therefore, the Changes in Working Capital = $25,100 - $20,800

Therefore, the Changes in Working Capital = $4,300

(b)-Cash flow for the Year

Net Income = Sales - Costs

Net Income = $12,000

Cash flow = Net Income + Decrease in Accounts receivables - Increase in Inventory + Increase in Accounts Payable

Cash flow = $12,000 + $2,800 - $2,300 + $3,800

Cash flow = $16,300