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 sum of the increase in floor inventory, the increase in debt to suppliers, and the increase in accounts receivable, minus the cost of expanding the showroom.Increase in floor inventory: $80,000Increase in debt to suppliers: $32,001Increase in accounts receivable: $20,001Cost of expanding the showroom: $140,000Net working capital requirement: $80,000 + $32,001 + $20,001 - $140,000 = $68,000

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