Question

Laurel Electronics reported the following information at its annual meeting: The company had cash and marketable securities worth $1,235,455, accounts payables worth $4,159,357, inventory of $7,121,599, accounts receivables of $3,488,121, short-term notes payable worth $1,151,663, and other current assets of $121,455 is all at book value. Suppose marking to market reveals that the market value of the firm’s inventory is 29 percent below its book value, its receivables are 18 percent below its book value, and the market value of its current liabilities is identical to the book value.

What is the firm's net working capital using market values? (Round intermediate calculations and final answer to the nearest whole dollar, e.g. 5,275.)

Net working capital

$

What is the percentage change in net working capital? (Round answer to 1 decimal place, e.g. 17.5%. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Percentage change in net working capital

%

Answer 1

Current Assets	Book Value	Market Value
Cash and Marketable Securities	$1235455	$1235455
Inventory	$7121599	= $7121599*71% =$5056335
Accounts Receivable	$3488121	=$3488121*82% = $2860259
Other Current Assets	$121455	$121455
Total	$11966630	$9273504

Current Liabilities	Book Value/ Market Value
Accounts Payable	$4159357
Short term notes payable	$1151663
Total	$5311020

1)	Net working capital using market value = Current Assets - Current Liabilities
		= $9273504-$5311020
		= $3962484
2)	Net working capital using book value = Current Assets - Current Liabilities
		= $11966630 - $5311020
		= $6655610
	Percentage change in net working capital = ($6655610-$3962484)/$6655610
		= 40.5%