Asked by Jillian Hearne on Jul 15, 2024
Verified
Current assets and current liabilities for Brayden Company are as follows: 
What conclusions can be drawn regarding Brayden's ability to meet its financial obligations?
A) The current ratio has worsened, and the working capital has decreased.
B) The current ratio has improved, and the working capital has increased.
C) The current ratio has improved, while the working capital has decreased.
D) The current ratio has worsened, but the working capital has increased.
Working Capital
Current assets minus current liabilities, indicating the liquidity available to a business for day-to-day operations.
- Identify and examine the current ratio as an indicator of liquidity.
Verified Answer
KK
Kurtis KlingbeilJul 15, 2024
Final Answer :
C
Explanation :
From the given information, we can calculate that the current ratio (current assets/current liabilities) has increased as compared to the previous period. However, the working capital (current assets - current liabilities) has decreased. This implies that while Brayden may be able to meet its short-term obligations using its current assets, it has fewer resources left over as working capital to invest in long-term projects or business growth. Therefore, the best choice is C.
Learning Objectives
- Identify and examine the current ratio as an indicator of liquidity.