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    stjmurphy's Avatar
    stjmurphy Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Mar 18, 2009, 04:49 PM
    Firms working capital
    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's Avatar
    hoightoider Posts: 41, Reputation: 2
    Junior Member
    		  
    #2

    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.
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