Question

A company has total current assets of $65 million consisting of Cash=$10 million, Marketable securities=$5 million, Accounts Receivables= $30 million, and inventories= $20 million. It has $$60 million in current liabilities consisting of $15 million in Accounts Payable, $15 million in Accruals, and $30 million in Notes Payable. Net Fixed Assets are $50 million. What is the company’s net operating working capital?

a.$5 million
b.$30 million
c.$115 million
d.$55 million

Answer 1

To calculate the net operating working capital, subtract the non-operating current assets and non-operating current liabilities from the total current assets and total current liabilities respectively.

Step-by-step explanation:

To calculate the net operating working capital, we need to subtract the non-operating current assets and non-operating current liabilities from the total current assets and total current liabilities respectively. In this case, the non-operating current assets are the marketable securities and the non-operating current liabilities are the notes payable.

Therefore, the net operating working capital is calculated as follows:

Net Operating Working Capital = Total Current Assets - Non-operating Current Assets - Total Current Liabilities + Non-operating Current Liabilities

Net Operating Working Capital = $65 million - $5 million - $60 million + $30 million = $30 million

Therefore, the correct answer is b.$30 million.