Question

Uptown Men's Wear has accounts payable of $2214, inventory of $7950, cash if $1263, fixed assets of $8400, accounts receivable of $3907, and long term debt of $4,200. What is the value of the net working capital to total assets ratio?

Answer 1

Answer:

Net working capital to fixed assets = 0.50678 rounded off to 0.51

Explanation:

The value of total assets can be calculated by adding the value of current assets and the value of fixed assets.

Total assets = Current Assets + Fixed assets

Total assets = (7950 + 1263 + 3907)  +  8400

Total Assets = $21520

The working capital is the difference between the value of current assets and the value of current liabilities.

Net Working capital = Current assets - Current Liabilities

Net working capital = (7950 + 1263 + 3907) - 2214

Net Working capital = $10906

The ratio of net working capital to fixed assets can be calculated by dividing the value of net working capital by the value of the fixed assets.

Net working capital to fixed assets = 10906 / 21520

Net working capital to fixed assets = 0.50678 rounded off to 0.51