f/servlet/quiz?quiz action-takeQuiz&quiz; probGuid-QNAPCOA8010100000041ebc620040
ID: 2657654 • Letter: F
Question
f/servlet/quiz?quiz action-takeQuiz&quiz; probGuid-QNAPCOA8010100000041ebc6200400008ctx-ream-00578ick-m_ 1533090694754 Attempts: 3 i. Calculating working capital Unitry Inc.'s CFO has decided to take a closer fook at the firm's short-term assets and liabilities. Unitry Inc.'s balance Keep the Highest: 3/5 Aa Aa sheet follows. Balance Sheet $130,000 Cash Accounts receivable 150,000 Accounts payable $90,000 $100,000 $75,000 $125,000 Accruals nventory Notes payable 340,00 Total current liabilities $330,000 $460,000 $200,000 Total liabilities and equity $990,000 Total current assets Long-term debt Net plant and equipment $650,000 Total common equity Total assets $990,000 while its net working capital is The value of Unitry Inc.'s working capital is The value of Unitry Inc.'s net operating working capital is Unitry Inc.'s current ratio is If Unitry Inc. decides to purchase a new building with long-term debt, its current ratio will 33 Cengage Learnng except as oted A rights reservedExplanation / Answer
Answer 1
The Gross working capital is the total of current assets that is 340000
The net working capital is excess of current assets over current liabilities that is 340000-340000 = 10000
Net operating Working capital includes mainly all the terms of net working capital except the current financial liability that is notes payable here
So the NOWC = Current assets - accounts payables - accruals = 340000 - 130000 - 75000 = 135000
Now the current ratio is current assets divided by current liabilities = 340000 / 330000 = 1.03
If the company decided to purchase a new building with long term debt then it current ratio will stays the same
because the building is the fixed assets and the Long term debt is non - current liability.
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