Compute the following. (Round your ratio answers to 1 decimal place. Omit the \"

Question

Compute the following. (Round your ratio answers to 1 decimal place. Omit the "$ & %" signs in your response.)

A. Working capital $90,000 Current ratio 1.6 : 1 Debt to assets ratio 60 % Debt to equity ratio 1.5 : 1 B. Working capital $80,000 Current ratio 1.5 : 1 Debt to assets ratio 50 % Debt to equity ratio 1.4 : 1 C. Working capital $9,000   Current ratio 1.6 : 1 Debt to assets ratio 70 % Debt to equity ratio 1.5 : 1 D. Working capital $85,000 Current ratio 1.6 : 1 Debt to assets ratio 59 % Debt to equity ratio 1.4 : 1

Explanation / Answer

Answer : Option A

Working Capital = Current assets - Current liabilities

= 240,000-150,000

= 90,000

Current Ratio = Current Assets / Current Liabilities

= 240,000 / 150,000

= 1.6 : 1

Debt to assets ratio = ( Short term debt + Long term debt) / Total assets

= (150,000+450,000)/1,000,000

= 600,000/1,000,000

= 60%

Debt to equity ratio = Total Liabilities / Total Shareholders Equity

= 600,000 / 400,000

= 1.5 : 1

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