Homework Answers
Answer:
The working capital of the company as on June 30 would be as under:
Currnet Assets would be $ 1,206,000. This is arrived after netting of Fixed assets from the total assets shared in the question.
Current Liabilities = Currnet Assets/2 = $603,000
Working capital = CA-CL = $ 603000
Acid test ration is calculated as under:
Cash+Account recivable+short term investment) = $444,000
Currnet Liabailities = Current assets (#1,206,000)/2 = $603000
ATR = 444,000/603000= 0.74
Working capital cycle will go up after the payment of Account payable. The calculation is as under
CA will remain unaffacted. However, CL will go down by $ 42000 hence at $ 645000. Working capital will be at $ 561000 after netting of CL against CA.
Current ration will increast. Calculation is as under:
CA/CL = $ 1206000/$645000= 1.89
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