5% MINDTAP Assignment 15-Working Capital Management Due Today at 11:59 PM CST Bi

Question

5% MINDTAP Assignment 15-Working Capital Management Due Today at 11:59 PM CST Big Cloud Burger Inc.'s CFO has decided to take a closer look at the firm's short-term assets and liabilities. Big Cloud Burger Inc.'s balance sheet follows. Balance Sheet Cash Accounts receivable Inventory Total current assets 5,000 Accounts payable 135,000Accruals 165,000Notes payable $525,000 Total current liabilities $150,000 $90,000 $140,000 $380,000 $300,000 $345,000 $1,025,000 Long-term debt Net plant and equipment Total assets $500,000Total common equity $1,025,000 Total liabilities and equity The value of Big Cloud Burger Inc.'s working capital is aii,while its net working capital is The value of Big Cloud Burger Inc.'s net operating working capital is Big Cloud Burger Inc.'s current ratio is If Big Cloud Burger Inc. decides to purchase inventory on account, its current ratio ill

Explanation / Answer

working capital measn the total current assets.

(a) working capital would be 525000 and Net working capital (525000-380000) = 145000

(b) Net operating working capital = operating current assets - operating current liability

= 525000 - (150000+90000)

= 525000 - 240000

Note - Notes payable is not a operating current liability.

Please note all value are in $.

Please comment in case of calrification required.

= 285000

(c) Current Raio = Current assets / Current liability

= 525000/380000

= 1.38

(d) if clound burger inc. decides to purchase inventory on account, its current ratio will decrease.

for eg suppose it purchase 50000 inventory on account then its current assets will become (525000+50000) = 575000

and current liabilities will become (380000+50000) = 430000

current ratio = 575000/430000 = 1.33

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