# The balance sheet of a firm shows current liabilities of $56,300 and long-term debt of$289,200...

## Question:

The balance sheet of a firm shows current liabilities of $56,300 and long-term debt of$289,200 as of last year. Current liabilities are $76,900 and long-term debt is$248,750 as of today, which is the end of the current year. The financial statements for the current year reflect an interest paid amount of $29,700 and dividends of$19,000.

What is the amount of the net new borrowing?

## Total Debt:

A company's debt represents the amount it owes to a third party and the debt can be classified into two types based on the duration of the debt. If a debt has to be repaid within one year, it is classified as a current liability. And if a debt has to be repaid after one year, it is classified as long-term debt.

Answer: The amount of the net new borrowings is -$40,450. As per the firm's data: • Beginning balance in current liabilities =$56,300
• Beginning balance in long-term debt = $289,200 • Ending balance in current liabilities =$76,900
• Ending balance in long-term debt = $248,750 • Interest expense =$27,900
• Dividends paid = $19,000 Computation: • Net new borrowings = Ending balance in long-term debt - Beginning balance in long-term debt • Net new borrowings =$248,750 - $289,200 • Net new borrowings = -$40,450