A firm has net working capital of $350. Long-term debt is $600, total assets are $950 and fixed assets are $400. What is the amount of the total liabilities?

Question

Quizplus · Accepted Answer

Total liabilities can be calculated using the equation: Total Assets = Total Liabilities + Equity. Here, Equity can be found using the Net Working Capital (Current Assets - Current Liabilities) and Fixed Assets. Given that Net Working Capital is $350 and Fixed Assets are $400, we can infer that Current Assets - Current Liabilities + Fixed Assets = Equity. Since Total Assets are $950, and we know that Total Assets = Total Liabilities + Equity, we rearrange to find Total Liabilities. Subtracting the given values from Total Assets, we find Total Liabilities = $950 - ($350 + $400) = $950 - $750 = $200. However, this calculation misinterprets the given data. Correctly, we should recognize that the question doesn't directly provide Current Assets or Equity, making the direct calculation of Total Liabilities from the given information not straightforward without additional assumptions. Given the error in the initial explanation, we need to correctly approach the problem by understanding that without the direct values for Current Liabilities or Equity, we cannot directly calculate Total Liabilities from the provided information. The correct approach involves recognizing the relationship between the given figures and the formula for calculating net working capital and total assets, but the initial explanation failed to accurately apply these relationships to arrive at the correct answer.

A Firm Has Net Working Capital of $350