A firm is considering changing their credit terms. It is estimated that this change would result in sales increasing by $ 1 comma 400 comma 000 $1,400,000. This in turn would cause inventory to increase by $ 175 comma 000 $175,000, accounts receivable to increase by $ 140 comma 000 $140,000, and accounts payable to increase by $ 60 comma 000 $60,000. What is the firm's expected change in net working capital?

The firm's expected change in net working capital: Net working capital increases by $255,000

Explanation:

Net working capital is calculated by using following formula:

Net working capital = Current assets - Current Liabilities

The inventory increases by $175,000, accounts receivable increases by $140,000.

The Current assets increases by: $175,000 + $140,000 = $315,000

The accounts payable increases by $60,000, the Current Liabilities increases by $60,000

Net working capital increases by: $315,000 - $60,000 = $255,000

$255,000

Explanation:

As we Know Working capital is the the net or current assets and current liabilities.

Increase in Current Assets

Accounts receivable    $140,000

Inventories                   $175,000

Total Increase in CA   $315,000

Increase in Current Liabilities

Accounts payable       $60,000

Increase in Working Capital =  Increase in Current Assets - Increase in Current Liabilities

Change in Working Capital = $315,000 - $60,000 = -$255,000

As current Liabilities increased more than the current assets, so the working capital will decrease by $255,000

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

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