Final answer:
Net plant and equipment are included in total net operating capital, which encompasses all assets used for a company's operations minus short-term liabilities.
It reflects long-term assets such as plant, property, and equipment after depreciation, which contrasts with the broader economic measure of net national product (NNP).
Step-by-step explanation:
Net plant and equipment is indeed included in total net operating capital. Total net operating capital refers to the total amount of assets a company uses to conduct its business, minus any liabilities that are to be paid within one year.
It includes long-term assets needed for operations, such as net plant, property, and equipment (PP&E), after accounting for depreciation, which represents the wear and tear on these assets over time.
We calculate net national product (NNP) by taking the Gross National Product (GNP) and subtracting depreciation.
Whilst the concept of NNP is related to the income generated by a country's economy, total net operating capital is more specifically related to the assets and capital used by a particular company for its operations.
In sum, net plant and equipment are tangible, long-term assets on a company's balance sheet, which are critical to firm operations and are indeed factored into the measurement of total net operating capital.