Asked by Joshua Murray on May 01, 2024
Verified
Based on the following information compute the (1) current ratio and (2) working capital. Current assets $200,000 Total assets 900,000 Current liabilities 80,000 Total liabilities 500,000\begin{array} { l r } \text { Current assets } & \$ 200,000 \\\text { Total assets } & 900,000 \\\text { Current liabilities } & 80,000 \\\text { Total liabilities } & 500,000\end{array} Current assets Total assets Current liabilities Total liabilities $200,000900,00080,000500,000
Working Capital
The difference between a company's current assets and current liabilities, indicating the short-term financial health and ability to fund day-to-day operations.
Current Ratio
A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.
Current Assets
Resources a business plans to change into cash, dispose of, or use up within either a year or its operating cycle, depending on which period extends further.
- Acquire knowledge on the calculation methods for different financial metrics and their relevance, such as working capital and current ratio.
Verified Answer
TR
Tiara RandleMay 02, 2024
Final Answer :
(1) Current ratio =2.5:1($200,000÷$80,000)= 2.5 : 1 \quad ( \$ 200,000 \div \$ 80,000 )=2.5:1($200,000÷$80,000)
(2) Working capital =$120,000($200,000−$80,000)= \$ 120,000 ( \$ 200,000 - \$ 80,000 )=$120,000($200,000−$80,000)
(2) Working capital =$120,000($200,000−$80,000)= \$ 120,000 ( \$ 200,000 - \$ 80,000 )=$120,000($200,000−$80,000)
Learning Objectives
- Acquire knowledge on the calculation methods for different financial metrics and their relevance, such as working capital and current ratio.