Question

Peeps inc has a book value of equity of $13080. Long term debt is $7400. Net working capital, other than cash is $1890. Fixed assets are $17770 and current liabilities are $1610. How much cash does the company have? What is the value of the current liabilities?

Answer 1

1) The total liabilities and equity of the company are the net book worth, or value of equity, plus current liabilities and long-term debt, so:

Total liabilities and equity = $13,080 + $1,610 + $7,400 = $22,090

This is also equal to the total assets of the company. Since total assets are the sum of all assets, and cash is an asset, the cash account must be equal to total assets minus all other assets, so:

Cash = $22,090 – $17,770 – $1,890 – $1,610 = $820

2) We have NWC other than cash, so the total NWC is:

NWC = $820 + $1,890 = $2,710

CA = NWC + CL

CA = $2,710 + $1,610

CA = $4,320