Answer:
Power Panther Corporation
a) Computation of the net operating working capital for 2018 and 2019
2019 2018
Total current assets $713.0 $646.0
Total current liabilities $444.8 $357.0
Net operating working
capital $268.2 $258.0
Explanation:
a) Data and Calculations:
1. Powell Panther Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2019 2018
Sales $ 2,040.0 $ 1,700.0
Operating costs excluding
depreciation and amortization 1,734.0 1,445.0
EBITDA $ 306.0 $ 255.0
Depreciation and amortization 39.0 36.0
Earnings before interest
and taxes (EBIT) $ 267.0 $ 219.0
Interest 44.9 37.4
Earnings before taxes (EBT) $ 222.1 $ 181.6
Taxes (25%) 88.8 72.6
Net income $ 133.3 $ 109.0
Common dividends $ 120.0 $ 87.2
Contribution to retained earnings $13.3 $21.8
2. Powell Panther Corporation: Balance Sheets as of December 31 (Millions of Dollars)
Assets 2019 2018
Cash and equivalents $ 21.0 $ 17.0
Accounts receivable 262.0 238.0
Inventories 430.0 391.0
Total current assets $ 713.0 $ 646.0
Net plant and equipment 393.0 357.0
Total assets $ 1,106.0 $ 1,003.0
Liabilities and Equity
Accounts payable $ 213.0 $ 170.0
Accruals 191.0 153.0
Notes payable 40.8 34.0
Total current liabilities $ 444.8 $ 357.0
Long-term bonds 408.0 340.0
Total liabilities $ 852.8 $ 697.0
Common stock 207.2 273.3
Retained earnings 46.0 32.7
Common equity $ 253.2 $ 306.0
Total liabilities and equity $ 1,106.0 $ 1,003.0
b) Powell Panther Corporation has the net operating working capital as the excess of current assets over current liabilities. It shows how liquid Powell Panther is and also its ability to settle its currently maturing current liabilities with its operating assets.
