Answer:
a. The working capital is $625,000
b. The current ratio is 2.82
c. The quick ratio is 2.08
Explanation:
In order to calculate the working capital first we need to calculate the Current Assets and the Current Liablities as follows:
Current Assets = Cash + Accounts receivable + Inventory + Prepaid Expenses + Temporary investments
= 154,000+210,000+240,000+15,000+350,000
=$969,000
Current Liablities = Accounts payble + Accrued liablities + Income tax payable + Notes payable,short term
= 245000+4000+10000+85000
=$344,000
a. Therefore, working capital = Current Assets - Current liabilities
= 969000 - 344000
= $625,000
b. To calculate the current ratio we have to use the following formula:
current ratio = Current Assets / Current liabilities
=969,000 /344,000
= 2.82
c. To calculate the quick ratio we have to use the following formula:
quick ratio = (Cash + Accounts receivable + Temporary investments ) / Current liabilities
= (154,000+210,000+350,000) / 344,000
= 2.08
