Question

Use the data below to compute the change in NOWC (Net Operating Working Capital)

	2014	2013
Cash	15	16
Short-term investments	10	65
Accounts receivable	369	317
Inventories	551	420
Property, plant & equipment (net)	928	874
Accounts payable	45	35
Short-term debt	99	65
Accrued liabilities	146	132
Long-term debt	658	585
Common stock	130	130
Retained earnings	770	714
Net revenue	3143	2850
Depreciation expense	113	92
Interest	89	63
Taxes	81	85
Net income	252	124

(Round to the nearest whole dollar)

Answer:

Answer 1

We know that Net Operating Working capital =Operating Current Assets - Operating Current Liabilities

Operating Current assets are the assets that is used for the ongoing operations of the company and includes Cash, , Accounts receivables, inventories etc.

Operating Current liabilities are the laibilities that has to be paid within the period of 1 year, it includes, accrued liabilities, accounts payables and taxes

For 2017, NOWC = Operating Current Assets - Operating Current Liabilities

Operating Current Assets = Cash,Accounts receivables,inventories

Operating Current Liabilities = accrued liabilities, accounts payables and taxes

So, NOWC = (15+369+551) - (146+45+81)

NOWC for 2017= $663

For 2018, NOWC = Operating Current Assets - Operating Current Liabilities

Operating Current Assets = Cash,Accounts receivables,inventories

Operating Current Liabilities = accrued liabilities, accounts payables, taxes

So, NOWC = (16+317+420) - (132+35+85)

NOWC = $501

For 2018, NOWC is $501