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A project that increased sales was accompanied by a $62,000 increase in inventory, a $26,000 increase in accounts receivable, and a $40,000 increase in accounts payable
A project that increased sales was accompanied by a $62,000 increase in inventory, a $26,000 increase in accounts receivable, and a $40,000 increase in accounts payable. Assuming these amounts remain constant, by how much has net working capital increased?
Expert Solution
Increase in current assets = Increase in inventory + Increase in accounts receivable
Increase in inventory = 62,000
Increase in accounts receivable = 26,000
Increase in current assets = 62,000 + 26,000
Increase in current assets = $88,000
Increase in current liabilities = Increase in accounts payable
Increase in accounts payable = 40,000
Increase in current liabilities = $40,000
An increase in net working capital is given by:
Increase in net working capital = Increase in current assets - Increase in current liabilities
Increase in net working capital = 88,000 - 40,000
Increase in net working capital = $48,000
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