A company with working capital of $500,000 and a current ratio of 2.25 pays a $100,000 short-term liability. The amount of working capital immediately after payment is:
A) $600,000.
B) $400,000.
C) $500,000.
D) $100,000.

Question

Quizplus · Accepted Answer

Working capital = Current assets - Current liabilitiesCurrent ratio = Current assets / Current liabilities2.25 = Current assets / Current liabilitiesCurrent assets = 2.25 * Current liabilitiesCurrent assets = 2.25 * ($500,000 - $100,000)Current assets = $900,000Working capital = $900,000 - ($500,000 - $100,000)Working capital = $500,000

A Company with Working Capital of $500,000 and a Current