Net Operating Asset

Brief Definition

Net Operating Assets (NOA) refer to the total operating assets of a company minus its operating liabilities.

Further Explanation

Net Operating Assets (NOA) refer to the total operating assets of a company minus its operating liabilities. These are the assets used in the core operations of the business, excluding any non-operating assets like cash and marketable securities. Operating liabilities include obligations that arise from the primary business activities, excluding financial liabilities like loans and bonds.

NOA = Operating Assets – Operating Liabilities

Example:
Company Z has the following balance sheet items:
Inventory: $2 million
Accounts receivable: $1.5 million
Property, plant, and equipment: $10 million
Accounts payable: $1 million
Accrued expenses: $500,000

NOA = (Inventory + Accounts Receivable + PPE) – (Accounts Payable + Accrued Expenses)
NOA = ($2 + $1.5 +$10) – ($1 + $0.5)
NOA = $12 million