Your firm has been in business for two years. In its first year, the firm ended with $227,000 of current assets, long-term assets of $143,000, $70,000 in surplus cash, current liabilities of $52,000, and long-term assets of $68,000. At the end of the second year, current assets were $279,000, long-term assets of $195,000, surplus cash of $90,000, current liabilities of $62,000, and long-term assets of $78,000. What is your firm's change in net operating working capital?
A) $22,000
B) $62,000
C) $42,000
D) $244,000
E) $32,000

Question

Quizplus · Accepted Answer

Net operating working capital is calculated as current assets minus current liabilities. In the first year, net operating working capital was $227,000 - $52,000 = $175,000. In the second year, net operating working capital was $279,000 - $62,000 = $217,000. The change in net operating working capital is $217,000 - $175,000 = $42,000.

Your Firm Has Been in Business for Two Years