Current liability: Every company has some debts or liabilities which need to be paid in less than one year or during current accounting period. Those debts or liabilities are called current liabilities. Working capital : It measures the amount of current assets of a company over and above its current liabilities. A positive working capital is preferred in any business. Current ratio : A part of liquidity ratios , current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period. To compute: The working capital and current ratio of company M.

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Chapter 11, Problem 11.8E

(a)

To determine

Current liability: Every company has some debts or liabilities which need to be paid in less than one year or during current accounting period. Those debts or liabilities are called current liabilities.

Working capital: It measures the amount of current assets of a company over and above its current liabilities. A positive working capital is preferred in any business.

Current ratio: A part of liquidity ratios, current ratio reflects the ability to oblige the short term debts of a company. It is calculated based on the current assets and current liabilities; a company has in an accounting period.

To compute: The working capital and current ratio of company M.

(b).

To determine

To compute: The working capital and current ratio after company 3 paid $200 million accounts payable by cash.

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