P. Noel's Inc.'s current ratio is 2. Current liabilities are $500,000. P. Noel's current assets equal ________ and net working capital is ________.
A) $500,000 and $1,000,000
B) $500,000 and $250,000
C) $1,000,000 and $500,000
D) $500,000 and $500,000

Question

Quizplus · Accepted Answer

The current ratio formula:

Current Ratio = Current Assets / Current Liabilities

We are given that the current ratio of P. Noel's Inc. is 2 and the current liabilities are $500,000.

2 = Current Assets / $500,000

Current Assets = 2 x $500,000 = $1,000,000

Net working capital is calculated by subtracting current liabilities from current assets:

Net Working Capital = Current Assets - Current Liabilities

Net Working Capital = $1,000,000 - $500,000 = $500,000

Therefore, the answer is C: $1,000,000 and $500,000.

P Noel's Inc