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Sometimes, we are interested in financial items that focus on the firm's operations. In these cases, we want to abstract some of the financing decisions,
Sometimes, we are interested in financial items that focus on the firm's operations. In these cases, we want to abstract some of the financing decisions, like debt and equity related items. See Section 3-2A Working Capital. In this course "Excess Cash" will be zero since this is a subjective estimation Solve for the net operating working capital below by following three steps 1. Consider a firm with $847 in Cash, $1,055 in Accounts Receivable, $3,002 in Inventory, $6,656 in Property, Plant and Equipment. Calculate the Current Assets of the firm o (be careful about what is included in Current Assets) 2. The same firm has $487 in Accurals, $916 in Accounts Payable, $9,353 in Long term Debt and $2,720 in Retained Earnings. Calculate the Current Liabilities of the firm excluding notes payable o (be careful about what is included in Current Liabilities) o What if you were given that current liabilities were $1,904 and notes payable were $444, can you find current liabilities excluding notes payable in this case? 3. Now that you have Current Assets and Current Liabilites without notes payable, use the formula from Section 3-2A to find Net Operating Working Capital Net Working Capital = Current Assets - (Current Liabilities - Notes) Net Working Capital = Current Assets - (Accruals + Accounts Payable) o Include your asnwer in dollars with no decimal example ($5040 or 5040 are both acceptable notation)
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