Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 2 - A Further Look at Financial Statements - Exercises - Page 80: E2-9

Answer

This question test concepts related to working capital and ratios. Make sure to understand what ratio actually means and what you are trying to accomplish by calculating a particular ratio.

Work Step by Step

Current ratio = current assets / current liabilities (provides information the company's liquidity to pay off its current liabilities) working capital = current assets minus current liabilities (show net investment to run company's day to day operations)
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