Table 15.2 The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent.
-The firm's initial net working capital is ________. (See Table 15.2)
A) -$ 5,000
B) $13,000
C) $ 5,000
D) $10,000

Question

Table 15.2  The company earns 5 percent on current assets and 15 percent on fixed assets. The firm's current liabilities cost 7 percent to maintain and the average annual cost of long-term funds is 20 percent.
-The firm's initial net working capital is ________. (See Table 15.2)
A) -$ 5,000 
B) $13,000 
C) $ 5,000 
D) $10,000

Quizplus · Accepted Answer

To calculate the firm's initial net working capital, we need to subtract the current liabilities from the current assets. Using the table, we can see that the current assets are $100,000 and the current liabilities are $95,000. So, the initial net working capital is $100,000 - $95,000 = $5,000.

Table 152 the Company Earns 5 Percent on Current Assets