Question

Calculate working capital and current ratio Firm O has accounts receivable of $31,000, cash of $14,600, property, plant, and equipment of $320,000, merchandise inventory of $43,200, accounts payable of $22,100, other accrued liabilities of $7,500, common stock of $250,000, and retained earnings of $129,200.

Required:

Calculate Firm Nâs working capital and current ratio.

Answer 1

Answer:

Working capital=$59,200

Current ratio= 3 :1

Explanation:

Current ratio = current assets/ current liabilities

Current ratio = 31000+ 14600+432000 =88800

Current liabilities = 22,100+7,500 = 29600

Working capital = Current asset - current liabilities

= 88800  -  29600=59200

Working capital=$59,200

Current ratio = Current asset /current liabilities

                   =  88800 /29600  = 3 :1

Current ratio= 3 :1