Affect on cash and net working capital?

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Affect on cash and net working capital?

How is cash and net working capital affected by borrowing $1 million in short term and investing the proceeds in inventory?

2006-10-03 11:20:36 · 1 answers · asked by Grasshopper 4 in Education & Reference ➔ Higher Education (University +)

1 answers

well...

net working capital = current assets - current liabilities

so it wouldnt have really have any effect so to speak on NWC, since the debt is a short term liability (current, less than 1 year) and is being invested into current assets (inventory)---they offset each other...

as for its effect on cash...pretty much the same thing...you would offset your current assets...because youre taking from cash and investing in inventory (also a CA)

make sense?

2006-10-03 12:06:15 · answer #1 · answered by xtcwmeg 3 · 0⤊ 0⤋