Question

A company has net working capital of $250. Long-term debt is $3,000, total assets are $6,500, and net fixed assets are $4,000. What is the amount of total liabilities? $4,750 $5,750 $5,250 $6,000 $5,500 - Previous Next >

Answer 1

Solution :

Calculation of value of Current assets :

As per the information given in the question we have

Total assets = $ 6,500 ;   Net fixed assets = $ 4,000 ;

We know that Current assets = Total assets – Net fixed assets

Applying the above information in the above formula we have

Current assets = $ 6,500 - $ 4,000 = $ 2,500

Calculation of Current liabilities :

The formula for calculating net working capital is

Net working capital = Current assets – Current liabilities

As per the information available we have

Net working capital = $ 250 ; Current assets = $ 2,500   ;

Applying the above information in the formula we have

$ 250 = $ 2,500 – Current liabilities

Current liabilities + $ 250 = $ 2,500

Current liabilities = $ 2,500 - $ 250 = $ 2,250

Calculation of Total Liabilities :

The formula for calculating Total liabilities is

Total liabilities = Current liabilities + Long term debt

As per the information available we have

Current liabilities = $ 2,250 ; Long term debt = $ 3,000

Applying the above information in the formula we have Total liabilities as

= $ 2,250 + $ 3,000

= $ 5,250

The amount of Total liabilities = $ 5,250

Thus the solution is option 3 = $ 5,250