Question

A company has the following balance sheet. What is its total operating capital? Cash $ 90 Accounts payable $ 30 Short-term investments 10 Accruals 50 Accounts receivable 20 Notes payable 40 Inventory 40 Current liabilities 120 Current assets 160 Long-term debt 70 Gross fixed assets 140 Common stock 30 Accumulated deprec. 40 Retained earnings 40 Net fixed assets 100 Total common equity 70 Total assets $260 Total liab. & equity $260 a. $130 b. $150 c. $160 d. $170

Answer 1

Total Operating Capital = Net Fixed Assets + Net Operating Working capital

where, Net Operating Working capital = Current Assets - Accounts payable - Accurals

=$160 - $30 - $50

= $80

Total Operating Capital = $100 + $80

= $180

So, Total Operating Capital is $180

Note- Notes Payable are not part of Operating Capital.

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