A firm has current assets of $100, net fixed assets of $500, short-term debt of $70, and long-term debt of $200. What does the balance sheet look like? What is shareholders’ equity? What is net working capital?

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Accepted Answer

In this case, total assets are $100+500=$600 and total liabilities are $70+200=$270, so shareholders’ equity is the difference: $600-270=$330. The balance sheet would thus look like:

Assets		Liabilities and Shareholders’ Equity
Current assets	$100	Current liabilities	$70
Net fixed assets	[latex]\underline{500}[/latex]	Long-term debt	200
		Shareholders’ equity Total liabilities and	[latex]\underline{330}[/latex]
Total assets	[latex]\underline {\underline {600}} [/latex] $	shareholders’ equity	[latex]\underline{\underline {600}}[/latex] $

Net working capital is the difference between current assets and current liabilities, or $100 - 70 = $30.

Question 2.1: A firm has current assets of $100, net fixed assets of $500,...

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