Ski World is considering a new product line which will require additional inventory costing $146,000. Accounts payable will increase by $87,000 as suppliers are willing to ﬁnance a portion of
These purchases. Accounts receivable are currently $80,000 and are expected to increase by 20%
If this project is accepted. What is the initial net working capital requirement for the new product
Line?

Question

Quizplus · Accepted Answer

The initial net working capital requirement is calculated as the increase in inventory plus the increase in accounts receivable minus the increase in accounts payable. Inventory increases by $146,000, accounts receivable increases by $16,000 (20% of $80,000), and accounts payable increases by $87,000. Therefore, the net working capital requirement is $146,000 + $16,000 - $87,000 = $75,000.

Ski World Is Considering a New Product Line Which Will