Please show your work! Please write a separate paragraph to explain your answer
ID: 2625227 • Letter: P
Question
Please show your work!
Please write a separate paragraph to explain your answer to each of the following questions.
Consider the information below from a firm's balance sheet for 2012 and 2013.
Current Assets 2012 2013 Change
Cash and Equivalents $1,561 $1,800 -$ 239
Short-Term Investments $1,052 $3,010 -$ 1,958
Accounts Receivable $3,616 $3,129 $ 487
Inventories $1,816 $1,543 $ 273
Other Current Assets $ 707 $ 601 $ 106
Total Current Assets $8,752 $10,083 -$1,331
Current Liabilities
Accounts Payable $5,173 $5,111 $ 62
Short-Term Debt $ 288 $ 277 $ 11
Other Current Liabilities $1,401 $1,098 $ 303
Total Current Liabilities $6,862 $6,486 $ 376
a) What is the Net Working Capital for 2013? What is it for 2012?
b) What is the Change in Net Working Capital (NWC)?
c) Assuming the Operating Cash Flows (OCF) are $7,155 and the Net Capital Spending (NCS) is $2,372,
what is the Cash Flow from Assets?
d) Why is an understanding of cash flow so important in the study of finance?
Explanation / Answer
a) Net working represents operating liquidity available to a business, organization or other entity, including governmental entity available frm current assets and current liabilities. Hence, the liquidity available currently will be current assets - current liabilities:
Hence, In 2013: Total Current Assets = $10,083 ; Total Current Liabilities $6,486
Net working capital = Current assets