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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:

  1. How much net operating working capital does the firm have?
  2. 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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