British Metals Is Reviewing Its Current Accounts to Determine How

question 77

Multiple Choice

British Metals is reviewing its current accounts to determine how a proposed project might affect the account balances.The firm estimates the project will initially require $81,000 in additional current assets and $57,000 in additional current liabilities.The firm also estimates the project will require an additional $8,000 a year in current assets in each of the first three of the four years of the project.How much net working capital will the firm recoup at the end of the project assuming that all net working capital can be recaptured?

• A)$105,000
• B)$24,000
• C)$48,000
• D)$68,000
• E)$81,000

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Definitions:

Income Statement

A financial statement showing a company's income, expenses, and profits over a specified period, typically a quarter or year.

EBIT

Earnings Before Interest and Taxes is a measure of a firm's profitability that excludes interest and income tax expenses.

Operating Profit

Profit generated from a company's core business operations, excluding deductions of interest and taxes.

Net Profit

The financial gain achieved after subtracting all expenses, taxes, and costs from total revenue.