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stjmurphy
Mar 18, 2009, 04:49 PM
If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be

Higher
Lower
the same
depends on the amount borrowed
hoightoider
Mar 18, 2009, 06:48 PM
w/c = current assets minus current liabilities.

current = one year or less
long term debt = greater than one year

So, if you borrowed a $1,000 for 6 months and put the cash in the bank or used the cash to create another current asset, there would be no increase or decrease in working capital. If the $1,000 was used to pay off a long term loan (not likely to happen), then there would be a decrease in working capital.