Net Operating Assets Calculator
With this net operating assets calculator, you can easily calculate the net operating assets (NOA) of a company. The net operating asset is a metric that will help you to analyze a company's operational performance.
This article will help you understand what net operating assets (NOA) is and how to calculate the metric using the net operating assets formula. We will also show you its application by demonstrating some examples.
What does NOA stand for? What are net operating assets?
We define the net operating assets (NOA) as the difference between the revenue-generating assets and the liabilities directly related to the company's operations. Since all components that form this metric impact the company's operational activities directly, it is deemed a powerful metric for analyzing its operational effectiveness.
Besides, we strip away the mystery of what is happening with a company's finances when we calculate the net operating assets. Financial assets usually generate interest income while the financial liabilities incur interest expenses. These are usually not considered the company's normal operational activities. Hence, the NOA formula is able to depict a more reliable picture of a company's operational effectiveness.
Here are a few calculators to help you analyse a company's operational performance:
How to calculate the net operating assets? The net operating assets formula
Now that you understand the definition of net operating assets, we can talk about how to calculate net operating assets. Let's take Company Alpha with the following information as an example. Try to enter these values into the net operating assets calculator to confirm the results!
- Cash: $250,000;
- Accounts receivable: $200,000;
- Inventory: $400,000;
- Prepaid expenses: $100,000;
- Fixed assets: $1,000,000;
- Accounts payable: $450,000; and
- Accrued operating expenses: $1,200,000.
Applying the NOA formula requires three steps:
Calculate operating assets
The first step is to calculate the
operating assetsusing the formula below:
operating assets = cash + accounts receivable + inventory + prepaid expenses + fixed assets
operating assetsfor Company Alpha is
$250,000 + $200,000 + $400,000 + $100,000 + $1,000,000 = $1,950,000.
Calculate operating liabilities
Second, we need to calculate the
operating liabilitieswith the formula below:
operating liabilities = accounts payable + accrued operating expenses
Hence, the Company Alpha's
$450,000 + $1,200,000 = $1,650,000.
Calculate net operating assets
The last step is to calculate the net operating assets,
NOA. We can do this by using the net operating assets formula below:
NOA = operating assets - operating liabilities
NOAfor Company Alpha is
$1,950,000 - $1,650,000 = $300,000.
So, whether you are wondering what does NOA stand for, or what is the definition of NOA you should be able to answer that in no time. Remember, you can always come back to this NOA calculator when you need help!
What are operating assets?
Operating assets are the assets of a company that are generating revenue for it. Examples of operating assets include cash, accounts receivables, inventories, etc.
Why are net operating assets useful?
Now that you understand the definition of net operating assets and how to calculate it, let's talk about the importance of this metric:
The net operating assets allow us to analyze a company's operational performance. It focuses on the core earnings, giving us a clear view of the company's operations.
The metric strips all the earnings coming from financial engineering such as leverage. Because of this, the NOA is an excellent metric to analyze companies with different economic structures and leverages.
What are operating liabilities?
Operating assets are liabilities or debts linked directly to the company's day-to-day operation. Examples of operating liabilities include accounts payables, accrued interest, etc.
Can net operating assets be negative?
Mathematically, yes. Net operating assets will be negative when operating assets are less than the operating liabilities. However, companies with negative net operating assets might not last long as they might not be able to generate enough revenue to cover their liabilities.
What are fixed assets?
Fixed assets are also known as non-current assets or long-lived assets. They are assets that cannot be converted into cash easily. Examples include property, plant, and equipment.
How do I calculate the net operating assets?
You can calculate the net operating assets in three steps:
Determine operating assets:
operating assets = cash + accounts receivable + inventory + prepaid expenses + fixed assets.
Find operating liabilities:
operating liabilities = accounts payable + accrued operating expenses.
Apply the net operating assets formula:
NOA = operating assets - operating liabilities.