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Use the following balance sheet data to compute the net operating working capital. Cash Accounts Receivable Inventory Current Assets Net fixed assets Total assets $60 160 200 $420 $700 $1.120 Account payable Accruals Notes payable Current liabilities Long-term debt Common equity Retained earnings Total liabilities and equity $180 110 200 $490 250 160 220 $1,120

Use the following balance sheet data to compute the net operating working capital. Cash Accounts Receivable Inventory Current Assets Net fixed assets Total assets $60 160 200 $420 $700 $1.120 Account payable Accruals Notes payable Current liabilities Long-term debt Common equity Retained earnings Total liabilities and equity $180 110 200 $490 250 160 220 $1,120

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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**Net Operating Working Capital Calculation** To compute the net operating working capital, use the following balance sheet data: **Assets:** - Cash: $60 - Accounts Receivable: $160 - Inventory: $200 - Current Assets Total: $420 - Net Fixed Assets: $700 **Total Assets:** $1,120 **Liabilities and Equity:** - Account Payable: $180 - Accruals: $110 - Notes Payable: $200 - Current Liabilities Total: $490 - Long-term Debt: $250 - Common Equity: $160 - Retained Earnings: $220 **Total Liabilities and Equity:** $1,120 **Explanation:** - **Current Assets** include cash, accounts receivable, and inventory, totaling $420. - **Current Liabilities** include account payable, accruals, and notes payable, totaling $490. **Formula:** Net Operating Working Capital = Current Assets - Current Liabilities Plugging in the values: Net Operating Working Capital = $420 - $490 = -$70 This results in a net operating working capital of -$70, indicating that the current liabilities exceed current assets by $70.
Transcribed Image Text:**Net Operating Working Capital Calculation** To compute the net operating working capital, use the following balance sheet data: **Assets:** - Cash: $60 - Accounts Receivable: $160 - Inventory: $200 - Current Assets Total: $420 - Net Fixed Assets: $700 **Total Assets:** $1,120 **Liabilities and Equity:** - Account Payable: $180 - Accruals: $110 - Notes Payable: $200 - Current Liabilities Total: $490 - Long-term Debt: $250 - Common Equity: $160 - Retained Earnings: $220 **Total Liabilities and Equity:** $1,120 **Explanation:** - **Current Assets** include cash, accounts receivable, and inventory, totaling $420. - **Current Liabilities** include account payable, accruals, and notes payable, totaling $490. **Formula:** Net Operating Working Capital = Current Assets - Current Liabilities Plugging in the values: Net Operating Working Capital = $420 - $490 = -$70 This results in a net operating working capital of -$70, indicating that the current liabilities exceed current assets by $70.
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Net operating working capital is an important concept in finance.

Essentially it is the excess of operating current assets of a company over and above its operating current liabilities.

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