Change in Working Capital: Scenario 2Which of the following statements will be true if the customers pay the company 12 days later than expected?The new working capital will increase to $4.8 million.The new working capital will decrease to $3.2 million.The new working capital will increase to $9.6 million.
Question
Change in Working Capital: Scenario 2Which of the following statements will be true if the customers pay the company 12 days later than expected?The new working capital will increase to 3.2 million.The new working capital will increase to $9.6 million.
Solution
To answer this question, we need to understand what working capital is and how it is affected by the payment terms with customers.
Working capital is calculated as current assets minus current liabilities. Current assets include cash, accounts receivable, and inventory, while current liabilities include accounts payable and other short-term debts.
If customers pay the company 12 days later than expected, this would increase the company's accounts receivable, which in turn increases the current assets. As a result, the working capital would increase.
However, without knowing the exact financial situation of the company, such as the amount of accounts receivable affected by this delay, it's impossible to determine the exact change in working capital. Therefore, any of the provided options could be true depending on the specific financial details of the company.
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