Cash Equation: Bettendorf Corporation has a book net worth of $17,800. The company's long-term debt is $6,900. Its net working capital, excluding cash, is $1,600. Its fixed assets are $21,300. How much cash does the company have? If the current liabilities are $2,575, what are the current assets?
To determine the amount of cash a company has, we need to calculate its total current assets which would include cash.
The formula to calculate current assets is:
Current Assets = Net Working Capital + Fixed Assets + Cash
Given the information provided:
Book Net Worth = $17,800
Long-Term Debt = $6,900
Net Working Capital (excluding cash) = $1,600
Fixed Assets = $21,300
Current Liabilities = $2,575
1. First, let's find the amount of cash by rearranging the current assets formula:
Cash = Current Assets - Net Working Capital - Fixed Assets
2. Calculate the amount of cash:
Cash = $17,800 - $1,600 - $21,300
Cash = -$4,100
Based on the given information, the company does not have any cash. Alternatively, it could have negative cash, which might indicate the company has more liabilities than assets.
Now, let's calculate the current assets:
Current Assets = Current Liabilities + Long-Term Debt + Equity (Book Net Worth)
Note: Equity = Book Net Worth - Long-Term Debt
1. Calculate Equity:
Equity = $17,800 - $6,900
Equity = $10,900
2. Calculate Current Assets:
Current Assets = $2,575 + $6,900 + $10,900
Current Assets = $20,375
The current assets of the company, including cash, are $20,375.