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Business Accounting MANAGERIAL ACCT W/CONNECT >IC<

Working Capital : Working capital is the amount fir capital that is required for the day to day operation of the business. It is the difference of Current assets and Current liabilities. The formula to calculate the working Capital is as follows: W o r k i n g C a p i t a l = C u r r e n t A s s e t s – C u r r e n t L i a b i l i t i e s Current Ratio : Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows: C u r r e n t R a t i o = C u r r e n t a s s e t s C u r r e n t l i a b i l i t i e s To determine: The Working Capital and Current Ratio at the end of this year Solution: 1. Working Capital The Working Capital at the end of this year is calculated as follows: W o r k i n g C a p i t a l = C u r r e n t A s s e t s – C u r r e n t L i a b i l i t i e s W o r k i n g C a p i t a l = 150000 − 60000 = 90000 Hence, the Working Capital at the end of this year is $90,000 Note: Ending balances are taken to calculate the working capital at the end of this year. Ending balance of Current assets is $150,000 and ending balance of current liabilities is $60,000 2. Current Ratio The Current Ratio at the end of this year is calculated as follows: C u r r e n t R a t i o = C u r r e n t a s s e t s C u r r e n t l i a b i l i t i e s C u r r e n t R a t i o = 150000 60000 = 2.5 Hence, the Current Ratio at the end of this year is 2.5 Note: Ending balances are taken to calculate the Current Ratio at the end of this year. Ending balance of Current assets is $150,000 and ending balance of current liabilities is $60,000

Working Capital : Working capital is the amount fir capital that is required for the day to day operation of the business. It is the difference of Current assets and Current liabilities. The formula to calculate the working Capital is as follows: W o r k i n g C a p i t a l = C u r r e n t A s s e t s – C u r r e n t L i a b i l i t i e s Current Ratio : Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows: C u r r e n t R a t i o = C u r r e n t a s s e t s C u r r e n t l i a b i l i t i e s To determine: The Working Capital and Current Ratio at the end of this year Solution: 1. Working Capital The Working Capital at the end of this year is calculated as follows: W o r k i n g C a p i t a l = C u r r e n t A s s e t s – C u r r e n t L i a b i l i t i e s W o r k i n g C a p i t a l = 150000 − 60000 = 90000 Hence, the Working Capital at the end of this year is $90,000 Note: Ending balances are taken to calculate the working capital at the end of this year. Ending balance of Current assets is $150,000 and ending balance of current liabilities is $60,000 2. Current Ratio The Current Ratio at the end of this year is calculated as follows: C u r r e n t R a t i o = C u r r e n t a s s e t s C u r r e n t l i a b i l i t i e s C u r r e n t R a t i o = 150000 60000 = 2.5 Hence, the Current Ratio at the end of this year is 2.5 Note: Ending balances are taken to calculate the Current Ratio at the end of this year. Ending balance of Current assets is $150,000 and ending balance of current liabilities is $60,000

MANAGERIAL ACCT W/CONNECT >IC<

MANAGERIAL ACCT W/CONNECT >IC<

15th Edition

ISBN: 9781259405303

Author: Garrison

Publisher: MCG

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MANAGERIAL ACCT W/CONNECT >IC<

Ch. 15 - Prob. 1Q Ch. 15 - What is the basic purpose for examining trends in...Ch. 15 - Prob. 3Q Ch. 15 - Prob. 4Q Ch. 15 - Prob. 5Q Ch. 15 - Prob. 6Q Ch. 15 - Prob. 7Q Ch. 15 - Prob. 8Q Ch. 15 - A company seeking a line of credit at a bank was...Ch. 15 - Prob. 1F15

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