Calculate the working capital ratio for the following scenario and explain what the
ratio means. Glenn’s Souvenir Shop has current assets of $125,000 and current
liabilities of $150,000.
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Answers
Calculate the working capital ratio for the following scenario and explain what the
Calculate the working capital ratio for the following scenario and explain what the ratio means. Glenn’s Souvenir Shop has current assets of $125,000 and current
Calculate the working capital ratio for the following scenario and explain what the ratio means. Glenn’s Souvenir Shop has current assets of $125,000 and current liabilities of $150,000.
The working capital ratio is calculated by dividing current assets by current liabilities.
The working capital ratio is calculated by dividing current assets by current liabilities.
The working capital ratio is calculated by dividing current assets by current liabilities. Working Capital Ratio
The working capital ratio is calculated by dividing current assets by current liabilities. Working Capital RatioBoth of these current accounts are stated separately from their respective long-term accounts on the balance sheet. This presentation gives investors and creditors more information to analyze about the company. Current assets and liabilities are always stated first on financial statements and then followed by long-term assets and liabilities.
The working capital ratio is calculated by dividing current assets by current liabilities. Working Capital RatioBoth of these current accounts are stated separately from their respective long-term accounts on the balance sheet. This presentation gives investors and creditors more information to analyze about the company. Current assets and liabilities are always stated first on financial statements and then followed by long-term assets and liabilities.This calculation gives you a firm understanding what percentage a firm’s current assets are of its current liabilities.
The working capital ratio is calculated by dividing current assets by current liabilities. Working Capital RatioBoth of these current accounts are stated separately from their respective long-term accounts on the balance sheet. This presentation gives investors and creditors more information to analyze about the company. Current assets and liabilities are always stated first on financial statements and then followed by long-term assets and liabilities.This calculation gives you a firm understanding what percentage a firm’s current assets are of its current liabilities.Let’s take a look at an example.
Example
ExampleLet’s take a look at an example. Kay’s Machine Shop has several loans from banks for equipment she purchased in the last five years. All of these loans are coming due which is decreasing her working capital. At the end of the year, Kay had $100,000 of current assets and $125,000 of current liabilities. Here is her WCR:
ExampleLet’s take a look at an example. Kay’s Machine Shop has several loans from banks for equipment she purchased in the last five years. All of these loans are coming due which is decreasing her working capital. At the end of the year, Kay had $100,000 of current assets and $125,000 of current liabilities. Here is her WCR:Working Capital Ratio Formula
ExampleLet’s take a look at an example. Kay’s Machine Shop has several loans from banks for equipment she purchased in the last five years. All of these loans are coming due which is decreasing her working capital. At the end of the year, Kay had $100,000 of current assets and $125,000 of current liabilities. Here is her WCR:Working Capital Ratio FormulaAs you can see, Kay’s WCR is less than 1 because her debt is increasing. This makes her business more risky to new potential credits. If Kay wants to apply for another loan, she should pay off some of the liabilities to lower her working capital ratio before she applies.