It’s helpful to get a sense of what does and doesn’t have an effect on the amount of working capital available, because that can clarify the concept.
The first aspect to notice is that any change involving only current accounts has no net effect on working capital.
$22,000 of current assets have been converted to fixed assets by the purchase of the office space.
Current assets of $37,500 less current liabilities of $17,000 result in working capital of $20,500.
Lie Dharma Floors started out with $25,000 in working capital. But its cash account has fallen to $12,500 and its working capital is down from $25,000 to $20,500.