FIN 4 Calculating Net Working Capital

Let's take a look at problem one, three, a, we're computing the change in net working capital. And I just want to give you the way of the land. Remember where we are and where we're going in problem one, one, we learned how to calculate operating cashflow in problem one, two, we learned how to calculate capital spending problem one, three. We're looking at cash flows related to changes in networking capital. And when we get to it, problem one, four is going to combine them all. And when we combine them all, we get cashflow from assets. But this problem is all about change in networking capital. And it's probably the easiest of the three components of cashflow from assets. Let's get down to business. A comparative balance sheet for ignite company is shown below and there's a balance sheet and says, what's the change in networking capital? Well, what's the networking capital. And networking capital is current assets minus current liabilities. That equals our net working capital. So this company's current assets, uh, for let's do 20, 29 and 20, 28. Let's do 2020 current assets are 20,000 current liabilities. So there's the current assets. There's the current liabilities. Current liabilities are 12. So the networking capital is eight. And it's just sort of a number that's used to like, how much money do I have to work with? Right. If I took all my assets, sold them off, paid off all my current debts, how much money would I have to play with? And it's, it's a useful number to know. So the networking capital of this company is $8,000. Uh, and in 20, 29, it's going to be 15 minus 10, 15,000 minus 10,000 is $5,000 in networking capital. Okay. What was the change in the networking capital? Well, I went from eight down to five. The change was it decreased by $3,000. The change in networking capital is it decreased oops, not by 30,000, but by $3,000 decrease. Okay. Uh, we've solved one three. Hey, what was the change in networking capital? It went down by $3,000 an easy or easier problem than most. And what else is easier than most hitting one of those buttons for me? Thanks so much for watching. Have a great day. Goodbye.