Working Capital : It is the difference between the current assets and the current liabilities of the business. Working capital is the amount which is used by businesses to meet its short-term expenses. Current Ratio : Current ratio is the ratio of current assets with current liabilities, it tells about the capability of a company to handle daily expenses. Best current ratio is 2:1. Quick Ratio: Quick ratio is the ratio of quick assets with current liabilities it tells about the liquidity of the company/ business. Best possible quick ratio is 1:1. Requirement-1: To Calculate: Working capital, current ratio and quick ratio.

Question

Question 4Waterfront Inc. wishes to borrow on a short-term basis withoutreducing its current ratio below 1.25. At present its current assetsand current liabilities are $1,600 and $1,000 respectively. How muchcan Waterfront Inc. borrow?

Answer 1

Question

Chapter 9, Problem 9.6E

To determine

Concept Introduction:

Working Capital: It is the difference between the current assets and the current liabilities of the business. Working capital is the amount which is used by businesses to meet its short-term expenses.

Current Ratio: Current ratio is the ratio of current assets with current liabilities, it tells about the capability of a company to handle daily expenses. Best current ratio is 2:1.

Quick Ratio: Quick ratio is the ratio of quick assets with current liabilities it tells about the liquidity of the company/ business. Best possible quick ratio is 1:1.

Requirement-1:

To Calculate:

Working capital, current ratio and quick ratio.

To determine

Concept Introduction:

Working Capital: It is the difference between the current assets and the current liabilities of the business. Working capital is the amount which is used by the business to meet its short term expenses.

Current Ratio: Current ratio is the ratio of current assets with current liabilities it tells about the how much company strong to meet its day to day expenses. Best current ratio is 2:1.

Quick Ratio: Quick ratio is the ratio of quick assets with current liabilities it tells about the liquidity of the company/ business. Best possible quick ratio is 1:1.

Requirement-2:

To Indicate:

What Conclusion from above ratios?

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