Question

For the next two questions suppose the following balance sheet:

Cash	$20		Accounts payable	$30
Short-term inevstments	20		Accruals	50
Accounts receivable	50		Notes payable	10
Inventory	60		Current liabilities	100
Current assets	160		Long-term debt	70
Net fixed assets	100		Common equity	30
			Retained earnings	60
Total assets	250		Total liab. & equity	$250

What is its total net operating working capital?

		$40
		$50
		$60
		$130
		$160

What is its total net operating capital?

		$140
		$150
		$160
		$230
		$260

Answer 1

Operating Current Assets = Cash + Accounts Receivable + Inventory
Operating Current Assets = $20 + $50 + $60
Operating Current Assets = $130

Operating Current Liabilities = Accounts Payable + Accruals
Operating Current Liabilities = $30 + $50
Operating Current Liabilities = $80

Net Operating Working Capital = Operating Current Assets - Operating Current Liabilities
Net Operating Working Capital = $130 - $80
Net Operating Working Capital = $50

Net Operating Capital = Net Operating Working Capital + Net Fixed Assets
Net Operating Capital = $50 + $100
Net Operating Capital = $150