Tab Transcontinental Corp.\'s CFO has decided to take a closer look at the firm\

ID: 2798909 • Letter: T

Question

Tab Transcontinental Corp.'s CFO has decided to take a closer look at the firm's short-term assets and liabilities. Tab Transcontinental Corp.'s balance sheet follows. Balance Sheet Cash Accounts receivable Inventory Total current assets $150,000 $90,000 $100,000 $340,000 Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total common equity Total liabilities and equity $130,000 $75,000 $125,000 $330,000 $460,000 $200,000 $990,000 $650,000 $990,000 Net plant and equipment Total assets The value of Tab Transcontinental Corp.'s working capital is , while its net working capital is The value of Tab Transcontinental Corp.'s net operating working capital is Tab Transcontinental Corp.'s current ratio is If Tab Transcontinental Corp. decides to purchase inventory with long-term debt, its current ratio will

Explanation / Answer

working capital

total of current Assets

340000

Net working capital

total of current assets-total of current liabilities

340000-330000

10000

net operating working capital

(Cash + Accounts Receivable + Inventories)

340000-205000

135000

(Accounts Payable + Accrued Expenses)

current ratio

current assets/current liabilities

340000/330000

1.030303

Answer to 4

increase

because total of current asset will increase but total of current liabilities will not increase as inventory is purchased from long term debt