Swinnerton Clothing Company's balance sheet showed total current assets of $2,250,all of which were required in operations.Its current liabilities consisted of $575 of accounts payable,$300 of 6% short-term notes payable to the bank,and $145 of accrued wages and taxes.What was its net operating working capital that was financed by investors?

Question

Quizplus · Accepted Answer

Net operating working capital is calculated by subtracting current liabilities from current assets, minus the cash and cash equivalents that are not required for operations.
$2,250 (total current assets) - $575 (accounts payable) - $300 (short-term notes payable) - $145 (accrued wages and taxes) = $1,230.
Therefore, the net operating working capital that was financed by investors is: $1,230 - $1,530 (cash and cash equivalents) = -$300.
However, since negative net operating working capital doesn't make sense, we need to add back the cash and cash equivalents that are not required for operations ($1,530):
$1,230 - $1,530 = -$300 + $1,530 = $1,230.
Thus, the net operating working capital that was financed by investors is $1,530.

Swinnerton Clothing Company's Balance Sheet Showed Total Current Assets of $2,250,all