Problem 2 - 10 Points Given the information below, calculate the Working Capital

Question

Problem 2 - 10 Points Given the information below, calculate the Working Capital and Current Ratio 1 Cash and marketable securities - $2,000,000 2 Accounts Receivable (Gross) - $3,000,000 3 Accounts Payable - $500,000 4 Accumulated Depreciation 2,000,000 6 Inventory - $4,000,000 7 Other Current Assets - $1,000,000 8 Common Stock at Par Value - $100,000 9 Current portion of long term notes - $750,000 10 Other Current Liabilities - $250,000 11 Goodwill - $10,000,000 12 Long-Term debt - $4,500,000 Working Capital 5 (points for grade) Current Ratio 5(points for grade) 10 (total) Problem 2 - 10 Points Given the information below, calculate the Working Capital and Current Ratio 1 Cash and marketable securities - $2,000,000 2 Accounts Receivable (Gross) - $3,000,000 3 Accounts Payable - $500,000 4 Accumulated Depreciation 2,000,000 6 Inventory - $4,000,000 7 Other Current Assets - $1,000,000 8 Common Stock at Par Value - $100,000 9 Current portion of long term notes - $750,000 10 Other Current Liabilities - $250,000 11 Goodwill - $10,000,000 12 Long-Term debt - $4,500,000 Working Capital 5 (points for grade) Current Ratio 5(points for grade) 10 (total)

Explanation / Answer

Working capital = Current assets-Current liabilities

= ($2,000,000+$3,000,000+$4,000,000+$1,000,000)-($5,00,000+$750,000+$250,000)

= $8,500,000

Current ratio = Current assets÷Current liabilities

= ($2,000,000+$3,000,000+$4,000,000+$1,000,000)÷($5,00,000+$750,000+$250,000)

= 6.67

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