Question

Return on net operating assets(RNOA=NOPAT/Average NOA) is commonly used to evaluate financial performance . if managers cannot increase NOPAT, they can still increase this return by reducing the amount of net operating assets (NOA) . Discuss specific ways that managers could manage inventories, property plant and equipment , account payable ,and other assets or liabilities

Answer 1

The specific ways that management can manage assets or liabilities are mentioned below:

- To manage inventories efficiently, a just in time inventory system can be used to ensure that not a lot of working capital is held up in inventories.

- Obsolete plant and equipment can be sold off and taken off the balance sheet.

- Payments to suppliers should be ensured to be made on time so that accounts payable balance is minimum.

- To manage accounts receivable balances, aging reports of accounts should be used.

- Additional cash should be invested in long term bonds to reduce operating assets.