Steve's Collectibles is expanding its product offerings to reach a wider range of customers. The expansion project includes increasing the floor inventory by $80,000 and increasing the debt to suppliers by $32,001. The company will also spend $140,000 to expand the size of the showroom. As part of the expansion plan, the company will be offering credit to its customers and thus expects accounts receivable to rise by $20,001. What is the initial net working capital requirement for this expansion project?

Question

Quizplus · Accepted Answer

The initial net working capital requirement is the change in current assets minus the change in current liabilities. In this case, the change in current assets is $80,000 + $140,000 + $20,001 = $240,001. The change in current liabilities is $32,001. Therefore, the initial net working capital requirement is $240,001 - $32,001 = $208,000.

Steve's Collectibles Is Expanding Its Product Offerings to Reach a Wider