Question

Trying to figure out the net operating working capital for this "What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number." Using this equation, "NOWC = Cash + Accounts receivables + Inventories – Accounts payables – Notes payables – Accruals" and my school's program is saying that the amount is incorrect. Please advise

These are the figures: cash- 650, accounts receivable- 2,750, inventories 1,950, accounts payable- 1,300, accruals- 650, notes payable- 376

Answer 1

Generally NOWC = Operating current assets - Operating current liabilities

Operating current assets is Cash, Accounts Receivable and Inventories

Operating current liabilities is Accounts payable,Accrued Expenses and notes payable

Note:Short term investments are called a temporary investment or marketable security and these are non-operating current assets.

so NOWC = $650+$2,750+$1,950-($1,300+$650+$376)

=$5,350-$2,326 =$3,024

another year

NOWC= $600+$2,500+$1,800-($1,200+$600+200)

=$4,900-$2,000 = $2,900