Question

A company has these assets: a building worth $250,000; equipment worth $20,000; and operating funds of $15,000. It also has two loans: one for $45,000 and one for $75,000. Calculate the company’s working capital ratio.

Answer 1

Hello there!

Answer:

The working capital ratio would be 2.38:1

Explanation:

To find the working capital ratio of a company, we would need to get the total assets and liabilities and divide them.

Assets:

$250,000+20,000+15,000= 285,000$

You would have $285,000 in total assets

Liabilities:

$45,000+75,000=120,000$

You would have $120,000 in total liabilities.

Now, we would divide 285,000 by 120,000 in order to get your ratio.

Lets solve:

$285,000 \div120,000= 2.375:1$

If you need to round, you would round the 5 over to the 7 to turn it to 8.

Your ratio would be 2.38:1

2.38:1 would be the CORRECT answer.