If a firm borrows money on a six-month bank loan, what would the working captial be immediately after obtaining the loan, relative to its working capital just prior to the loan?

Would it be Higher, Lower, the same?

CaptainForest

Before the loan, let’s say we have 100 CA and 60 CL, therefore a total WC of 40

The firm borrows the money (let’s say 100) on a 6 month bank loan, so the JE would be:
Dr. Cash 100
Cr. Bank Loan Payable 100

The question is, is the Bank Loan current or long term liability?

The definition of a current liability is a liability payable within 1 year.

Since it is payable in 6 months, it is a CL.

Therefore,
CA of 200 – CL of 160 = WC of 40

Therefore, NO change in WC