Which items are included in Net Operating Assets (NOA)?

Which items are included in Net Operating Assets (NOA)?

• A. PPE, intangibles, prepaid assets, goodwill, inventory, accounts receivable, accounts payable
• B. Debt and pension liabilities
• C. Cash and cash equivalents
• D. Marketable securities

Answer: (B)

Net Operating Assets reflect what a business uses to operate, so only operating assets (and the corresponding operating liabilities) matter. Operating assets include PPE, intangible assets, goodwill, prepaid assets, inventory, and accounts receivable. Operating liabilities include items like accounts payable, accrued expenses, and deferred revenue. Because NOA is the difference between operating assets and operating liabilities, financing items such as cash and cash equivalents, marketable securities, debt, and pension liabilities do not belong in NOA. In short, NOA comprises the operating assets (PPE, intangibles, goodwill, prepaid assets, inventory, accounts receivable) minus the operating liabilities (accounts payable, etc.); debt and pension obligations are financing items, not part of NOA.

Net Operating Assets reflect what a business uses to operate, so only operating assets (and the corresponding operating liabilities) matter. Operating assets include PPE, intangible assets, goodwill, prepaid assets, inventory, and accounts receivable. Operating liabilities include items like accounts payable, accrued expenses, and deferred revenue. Because NOA is the difference between operating assets and operating liabilities, financing items such as cash and cash equivalents, marketable securities, debt, and pension liabilities do not belong in NOA. In short, NOA comprises the operating assets (PPE, intangibles, goodwill, prepaid assets, inventory, accounts receivable) minus the operating liabilities (accounts payable, etc.); debt and pension obligations are financing items, not part of NOA.