Balance Sheets 2013 2012 $100 275 375 $750 2,000 $2,750 $85 300 350 $735 1,490 $

Question

Balance Sheets 2013 2012 $100 275 375 $750 2,000 $2,750 $85 300 350 $735 1,490 $2,225 Cash and equivalents Accounts receivable Inventories Total current assets Net plant and equipment Total assets $150 75 150 $375 450 1,225 700 $2,750 Accounts payable Accruals Notes payable 50 175 $310 290 1,225 400 $2,225 Total current liabilities Long-term debt Common stock Retained earnings Total liabilities and equity Income Statements: 2013 2012 Sales Operating costs excluding depreciation EBITDA Depreciation and amortization EBIT Interest EBT Taxes (40%) Net income $2,000 1,250 $750 100 $650 62 $588 235 $353 $1,500 1,000 $500 75 $425 45 $380 152 $228 Dividends paid Addition to retained earnings $53 $300 $48 $180 Shares outstanding Price WACC 100 $25.00 10.00% 100 $22.50 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)? $305

Explanation / Answer

Net operating working capital = current assets - current liabilities

Since cash and equivalents account is not considered excess cash exclude this from current assets.

And, exclude interest-bearing debt from current liabilities (Notes payable in our case).

NOWC = (750 - 100) - (375 - 150) = $425

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