1. Calculating working capital Aa Aa Minuteman Cafe Inc.\'s CFO has decided to t
ID: 2802632 • Letter: 1
Question
1. Calculating working capital Aa Aa Minuteman Cafe Inc.'s CFO has decided to take a closer look at the firm's short-term assets and liabilities. Minuteman Cafe Inc.'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 Net plant and equipment $650,000 Total assets $990,000 The value of Minuteman Cafe Inc.'s working capital is , while its net working capital is The value of Minuteman Cafe Inc.'s net operating working capital is Minuteman Cafe Inc.'s current ratio is If Minuteman Cafe Inc. decides to purchase inventory on account, its current ratio willExplanation / Answer
Gross Working Capital = Total Current Assets = 340000
Net Working Capital = Total Current Assets - Total Current Liabilities = 340000 - 330000 = 10,000
Net Operating Current Capital = Operating CA - Operating CL = Cash + Inv + A/R - Accruals - Accounts Payable
= 340000 - 75000 - 130000 = 135000
Current Ratio = CA/CL = 340000/330000 = 1.03
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