Quantitative Problem: Rosnan Industries\' 2013 and 2012 balance sheets and incom

Question

Quantitative Problem: Rosnan Industries' 2013 and 2012 balance sheets and income statements are shown below.

The balance in the firm's cash and equivalents account is needed for operations and is not considered "excess" cash.

What is Rosnan's 2013 net operating working capital (NOWC)?
_____$

What is Rosnan's 2013 net working capital (NWC)?
____$

Balance Sheets: 2013 2012 Cash and equivalents $110   $95   Accounts receivable 275   300   Inventories 375   350         Total current assets $760   $745   Net plant and equipment 2,000   1,490   Total assets $2,760   $2,235   Accounts payable $150   $85   Accruals 75   50   Notes payable 160   185         Total current liabilities $385   $320   Long-term debt 450   290   Common stock 1,225   1,225   Retained earnings 700   400   Total liabilities and equity $2,760   $2,235  

Explanation / Answer

1) Net Operating working capital = Cash + accounts receivables + Inventories - Accounts payable - Accrued expenses

NOWC = 110 + 275 + 375 - 150 - 75 = $535

2) Net working capital = Accounts receivable + Inventories - Accounts payable - accrued expenses - notes payable (considering notes payable is not debt like in nature and is continuous in nature).

NWC = 275 + 375 - 150 - 75 - 160 = $265

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