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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 Machinery50,000.00Sharecapital50,000.00Share capital35,000.00Inventory25,000.00Retainedearnings25,000.00Retained earnings5,000.00Accounts receivable2,000.00Longtermdebt2,000.00Long-term debt25,000.00Patent10,000.00Shorttermdebt10,000.00Short-term debt7,000.00Cash5,000.00Accountspayable5,000.00Accounts payable20,000.00Total assets92,000.00Totalliabilitiesandequity92,000.00Total liabilities and equity92,000.00Calculate the operating working capital for Aze limited.47,00047,0007,0003,0003,00043,000

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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 (25,000),AccountsReceivable(25,000), Accounts Receivable (2,000), and Cash (5,000).So,thetotalcurrentassetsare5,000). So, the total current assets are 25,000 + 2,000+2,000 + 5,000 = $32,000.

The current liabilities are Short-term debt (7,000)andAccountsPayable(7,000) and Accounts Payable (20,000). So, the total current liabilities are 7,000+7,000 + 20,000 = $27,000.

Therefore, the operating working capital for Aze Limited is Current Assets - Current Liabilities = 32,00032,000 - 27,000 = $5,000.

So, none of the options provided (47,000,47,000, 7,000, 3,000,3,000, 43,000) are correct. The operating working capital for Aze Limited is $5,000.

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