The Reformulating the Balance Sheet:

1. All assets are either operating or non-operating. Operating assets are used to generate sales while non-operating assets are typically excess monies that have not yet been invested in operating assets or excess cash that will be returned to the bondholders and stockholders at some point in the future.

2. Typical non-operating assets are excess cash or cash equivalents and investments. All other assets are typically operating.

3. Typical non-operating liabilities are current portion of long term debt, long term debt, and capitalized lease obligations. All other liabilities including accounts payable, and accrued expenses are typically operating liabilities.

4. Invested capital equals operating assets minus operating liabilities.

5. Net non-operating assets or net liabilities equals non-operating assets minus non-operating liabilities.

Sample Balance Sheet:

Cash needed for operations200Accounts payable 300

Excess cash600Accrued expenses 250

Inventory400Current portion of Long term debt 150

Investment in marketable securities300Long term debt 1000

Plant property and Equipment 1100Stockholders Equity 900

Total assets 26002600

What are the two non-operating assets?What do they sum to?

What are the two non-operating liabilities?What do they sum to?

What are the three operating assets?What do they sum to?

What are the two operating liabilities?What do they sum to?

Calculate the invested capital.Calculate the net non-operating liability.

Please construct a balance sheet with invested capital on the left side and the sum of net non-operating liabilities and stockholders equity on the other, the balance sheet must balance.