Operating Working CapitalThe balance sheet of Aze Limited is given below. Balance Sheet: Current YearAssetsAmount Liabilities and EquityAmount Machinery$50,000.00Share capital$35,000.00Inventory$25,000.00Retained earnings$5,000.00Accounts receivable$2,000.00Long-term debt$25,000.00Patent$10,000.00Short-term debt$7,000.00Cash$5,000.00Accounts payable$20,000.00Total assets$92,000.00Total liabilities and equity$92,000.00Calculate the operating working capital for Aze limited.$47,000$7,000$3,000$43,000
Question
Operating Working CapitalThe balance sheet of Aze Limited is given below. Balance Sheet: Current YearAssetsAmount Liabilities and EquityAmount Machinery35,000.00Inventory5,000.00Accounts receivable25,000.00Patent7,000.00Cash20,000.00Total assets92,000.00Calculate the operating working capital for Aze limited.7,00043,000
Solution
Operating working capital is calculated as current assets minus current liabilities.
From the balance sheet of Aze Limited, we can see that the current assets are Inventory (2,000), and Cash (25,000 + 5,000 = $32,000.
The current liabilities are Short-term debt (20,000). So, the total current liabilities are 20,000 = $27,000.
Therefore, the operating working capital for Aze Limited is Current Assets - Current Liabilities = 27,000 = $5,000.
So, none of the options provided (7,000, 43,000) are correct. The operating working capital for Aze Limited is $5,000.
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