Think a little deeper - What does the Current ratio (or amount of Working Capital tell...
Think a little deeper - What does the Current ratio (or amount of Working Capital tell us)? Hint - what do we expect to happen to current assets and current liabilities?
Homework Answers
| Current Ratio measures the ability of a business to meet its current / short-term liabilities. The ratio considers the excess of the total current assets versus the total current liabilities. | ||||||||||||||||
| In other terms, it gives an idea as to what percentage of current liabilities can be settelled using current assets. | ||||||||||||||||
| Current Ratio | = | Current Assets | ||||||||||||||
| Current Liabilities | ||||||||||||||||
| A ratio of 1 and above, means the organisation has enough sources to settle its current liabilites if they need to be settled immediately. | ||||||||||||||||
| However, if the ratio is too high, it means that the company may have excess cash resources which are not invested in the business or other assets. | ||||||||||||||||
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Think a little deeper - What does the Current ratio (or
amount of Working Capital tell...
What does current ratio or amount of working capital tell us? What do we expect to...
What does current ratio or amount of working capital tell us? What do we expect to happen to current assets and current liabilities?
What can a business that has too little working capital do to increase it? · Decrease...
What can a business that has too little working capital do to increase it? · Decrease inventory · Increase short-term liabilities · Reduce current assets · Increase cash on hand
Determine the effect on the current ratio, quick ratio, net working capital (current assets minus current...
Determine the effect on the current ratio, quick ratio, net working capital (current assets minus current liabilities), the debt ratio (total liabilities to total assets) of each of the following transactions. Consider each transaction seperately and assume that prior to each transaction the current ratio is 1.8x, the quick ratio is 1.5x, and the debt ratio is 75%. Think about what is included in each portion of the ratio. Use "I" for increase, "D" for decrease, and "N" for no...
Based on the following information, compute the (1) current ratio and (2) working capital. Current assets  
Based on the following information, compute the (1) current ratio and (2) working capital. Current assets $200,000 Total assets 900,000 Current liabilities 80,000 Total liabilities 500,000 (1) Current Ratio (2) Working Capital Ranger Corporation reports the following amounts in their 2015 financial statements: At December 31, 2015 For the Year 2015 Total assets $2,000,000 Total liabilities 1,310,000 Total stockholders’ equity ? Interest expense $25,000 Income tax expense 130,000 Net income 150,000 Instructions Compute the December 31,...
Working capital: Mukhopadhya Network Associates has a current ratio of 1.60, where the current ratio is defined as follo...
Working capital: Mukhopadhya Network Associates has a current ratio of 1.60, where the current ratio is defined as follows: current ratio = current assets/current liabilities. The firm’s current assets are equal to $1,233,265, its accounts payables are $419,357, and its notes payables are $351,663. Its inventory is currently at $721,599. The company plans to raise funds in the short-term debt market and invest the entire amount in additional inventory. How much can notes payable increase without the current ratio falling...
ODOO Hill 16-9 “Working capital helps tell potential inves- tors whether a company has enough current...
ODOO Hill 16-9 “Working capital helps tell potential inves- tors whether a company has enough current assets to pay current liabilities as they become due." Do you agree? Explain.
SDJ, Inc., has net working capital of $2,710, current liabilities of $3,950, and inventory of $3,420....
SDJ, Inc., has net working capital of $2,710, current liabilities of $3,950, and inventory of $3,420. What is the current ratio? What is the quick ratio? Net working capital $ Current liabilities $ Inventory $ 2,710 3,950 3,420 Complete the following analysis. Do not hard code values in your calculations. Current assets Current ratio Quick ratio
A current ratio greater than 1 can tell us that the company should be able to...
A current ratio greater than 1 can tell us that the company should be able to cover the current liabilities should be able to keep away from short-term cash problems may have too much capital tied up in current assets All of these
Choice Hotels 30, Ratios 20186 Dec. 31,2017 Formulas Current ratio current ratio current assets/current iabilities working...
Choice Hotels 30, Ratios 20186 Dec. 31,2017 Formulas Current ratio current ratio current assets/current iabilities working capital current assets-current Eabilities Working capital NoteUse the ratios in your answers, and explain what the ratios mean. 1. Based on your calculations of current ratio and total-asset turnover ratio, what would you recommend we do to improve our asset management? 2. We would like to improve the use of our working capital. Based on your ratio calculations. What are your specific recommendations? Please...
How does a negative working capital (current assets-current liabilities) reflect on the management of receivables and...
How does a negative working capital (current assets-current liabilities) reflect on the management of receivables and inventory?
ODOO Hill 16-9 “Working capital helps tell potential inves- tors whether a company has enough current assets to pay current liabilities as they become due." Do you agree? Explain.
SDJ, Inc., has net working capital of $2,710, current liabilities of $3,950, and inventory of $3,420. What is the current ratio? What is the quick ratio? Net working capital $ Current liabilities $ Inventory $ 2,710 3,950 3,420 Complete the following analysis. Do not hard code values in your calculations. Current assets Current ratio Quick ratio
A current ratio greater than 1 can tell us that the company should be able to cover the current liabilities should be able to keep away from short-term cash problems may have too much capital tied up in current assets All of these
Choice Hotels 30, Ratios 20186 Dec. 31,2017 Formulas Current ratio current ratio current assets/current iabilities working capital current assets-current Eabilities Working capital NoteUse the ratios in your answers, and explain what the ratios mean. 1. Based on your calculations of current ratio and total-asset turnover ratio, what would you recommend we do to improve our asset management? 2. We would like to improve the use of our working capital. Based on your ratio calculations. What are your specific recommendations? Please...
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