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A firm holding $422 million in interest-bearing financial assets and with financing debt of $1,891 million, reported shareholders’ equity of $597 million. What were its net operating assets? A. $2,066 million B. $2,156 million C. $2,166 million D. $2,056 million

Question

A firm holding 422millionininterestbearingfinancialassetsandwithfinancingdebtof422 million in interest-bearing financial assets and with financing debt of 1,891 million, reported shareholders’ equity of 597million.Whatwereitsnetoperatingassets?A.597 million. What were its net operating assets? A. 2,066 million B. 2,156millionC.2,156 million C. 2,166 million D. $2,056 million

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Solution

To calculate the net operating assets (NOA), we use the formula:

NOA = Total assets - Non-operating assets

In this case, the total assets of the firm are the sum of its financing debt and shareholders' equity. So, total assets = 1,891million(financingdebt)+1,891 million (financing debt) + 597 million (shareholders' equity) = $2,488 million.

The non-operating assets are the interest-bearing financial assets, which are $422 million.

So, NOA = 2,488million(totalassets)2,488 million (total assets) - 422 million (non-operating assets) = $2,066 million.

Therefore, the net operating assets of the firm were 2,066million.So,theanswerisA.2,066 million. So, the answer is A. 2,066 million.

This problem has been solved

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