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1200 Cashco 5 A/H Other CA NOV. 2019 Essay question (15%) The following data comes from Company A and B: Company A S000 Compa
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Answer #1

1. NOA= Net operating assets

= Operating Assets-Operating Liabilities

COMPANY A COMPANY B

=$80,000-$20,000 = $40,000-$70,000

= $60,000 = -$30,000

NFA= Net financial Asset

= Financial Asset - Financial Liabilities

COMPANY A COMPANY B

= $40,000-$70,000 = $80,000-$20,000

= -$30,000 = $60,000

2. COMPANY A - heavily investing on daily working assets. does not want to capitalize expenditure to keep control of Working capital due to high NOA

COMPANY B - more of a long term investment exhibited from higher NFA and negative NOA. working capital management can be issue for this company

3. COMPANY A have higher competitive advantage due to higher NOA compared to COMPANY B(Negative NOA). Also positive working capital management will lead COMPANY A to run business on daily basis and smooth flow of liquidity

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