Working Capital Calculation for Jasmine-Pine Ltd.
What is the net working capital for Jasmine-Pine Ltd. based on the given data?
Calculate the net working capital.
Net Working Capital Calculation
The net working capital for Jasmine-Pine Ltd. is $177,000. Net working capital is calculated by subtracting current liabilities from current assets.
Net working capital is such an exciting concept, especially when we see it in action for a successful company like Jasmine-Pine Ltd. Let's break down the calculation to understand how they arrive at the $177,000 figure.
In the books of Jasmine-Pine Ltd., the following numbers are provided:
- Land and buildings: $2,000,000
- Vehicles: $120,000
- Bank: $75,000
- Inventory: $56,000
- Accounts receivable: $29,000
- Accounts payable: $21,000
- IRS Payable: $12,000
To calculate the net working capital, we need to consider the current assets and current liabilities. For assets, we sum up the inventory, accounts receivable, and bank amounts. This gives us a total of $56,000 + $29,000 + $75,000 = $160,000. Next, we add up the current liabilities of accounts payable and IRS Payable, which total $21,000 + $12,000 = $33,000.
Subtracting the total current liabilities from the total current assets, we get:
Net Working Capital = Total Current Assets - Total Current Liabilities
Net Working Capital = $160,000 - $33,000
Net Working Capital = $177,000
So, Jasmine-Pine Ltd. has a net working capital of $177,000. This amount indicates the company's liquidity and ability to meet its short-term financial obligations, showcasing a healthy financial position for their day-to-day operations.
Let's continue learning about working capital and its significance in managing a company's finances!