A company with working capital of $740,000 and a current ratio of 2 pays a $126,000 short-term liability. The amount of working capital immediately after payment is
A company with working capital of $740,000 and a current ratio of 2 pays a $126,000 short-term liability. The amount of working capital immediately after payment is
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
A company with
Expert Solution
Step 1: Working capital:
Solution:
Working capital = Current assets - Current liabilities
Current assets / Current liabilities = 2
So, current assets = 2*current liabilities
Current assets - Current liabilities = Working capital
Current assets - Current liabilities = $740,000
(2*current liabilities) - Current liabilities = $740,000
1*current liabilities = $740,000
Current liabilities = $740,000 / 1 = $740,000
Current assets = 2*740,000
= $ 14,80,000
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