Question

In: Finance

BALANCE SHEETS: Assets: Cash &nbs

BALANCE SHEETS:

Assets:

Cash 120,000 160,000

Accounts Receivable 520,000 620,000

Inventory 305,000 290,000

Fixed Assets, net 410,000 510,000

Total Assets 1,355,000 1,580,000

Liabilities and Equity:

Accounts Payable 350,000 $375,000

Long-term Debt 500,000 625,000

Common Stock 50,000 75,000

Retained Earnings 455,000 505,000

Total Liabilities and Equity 1,355,000 1,580,000

INCOME STATEMENT:

Revenue 3,500,000

Cost of Goods Sold 2,275,000

General and Administrative 515,000

Depreciation Expense 120,000

Earnings Before Interest and Taxes 590,000

Interest Expense 40,000

Pretax Net Income 550,000

Income Taxes 167,000

Net Income 383,000

What was Gannon’s investment in net working capital for 2017?

Expert Solution

Formula to calculate investment in net working capital
Investment in net working capital = Net working capital of 2017 - Net working capital of 2016

Formula to calculate net working capital
Net working capital = Current assets - Current Liabilities

Calculation of net working capital in 2017
Net working capital = Cash + Accounts receivable + Inventory - Accounts payable
Net working capital = 160,000 + 620,000 + 290,000 - 375,000
Net working capital (2016)		$695,000

Calculation of net working capital in 2016
Net working capital = Cash + Accounts receivable + Inventory - Accounts payable
Net working capital = 120,000 + 520,000 + 305,000 - 350,000
Net working capital (2017)		$595,000

Calculation of investment in net working capital
Investment in net working capital = 695,000 - 595,000
Investment in net working capital		$100,000

Gannon's investment in net working capital for 2017 is $100,000

jeff jeffy answered 2 years ago

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