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Exercise 6 Rao Corporation has the following balance sheet. Cash $ 10 Accounts payable $ 20 Short-term investments Accruals 20 Accounts receivable 50 Notes payable
Exercise 6
Rao Corporation has the following balance sheet.
Cash | $ 10 | Accounts payable | $ 20 |
Short-term investments |
| Accruals | 20 |
Accounts receivable | 50 | Notes payable | 50 |
Inventory | 40 | Current liabilities | $ 90 |
Current assets | $130 | Long-term debt | 0 |
Net fixed assets | 100 | Common equity | 30 |
|
| Retained earnings | 50 |
Total assets | $230 | Total liab. & equity | $230 |
Required:
- How much net operating working capital does the firm have?
- How does net working capital affect the decision making?
Please explain part B briefly, it is important.
(8 Marks)
Thank you.
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