The balance sheet for Kinektic Co.is presented below.
During 2009, the firm earned $28 000 after taxes based on net sales of $480,000.
a.Calculate Kinektic's current ratio and net working capital.
b.Assume that Kinektic uses $20,000 of its cash to reduce current liabilities.Recompute the current ratio and net working capital.
c.What effect, if any, does the change proposed in question b have on Peterson's liquidity?

Question

The balance sheet for Kinektic Co.is presented below.
  During 2009, the firm earned $28 000 after taxes based on net sales of $480,000.
a.Calculate Kinektic's current ratio and net working capital.
b.Assume that Kinektic uses $20,000 of its cash to reduce current liabilities.Recompute the current ratio and net working capital.
c.What effect, if any, does the change proposed in question b have on Peterson's liquidity?

Quizplus · Accepted Answer

The Answer of The balance sheet for Kinektic Co.is presented below.
  During 2009, the firm earned $28 000 after taxes based on net sales of $480,000.
a.Calculate Kinektic's current ratio and net working capital.
b.Assume that Kinektic uses $20,000 of its cash to reduce current liabilities.Recompute the current ratio and net working capital.
c.What effect, if any, does the change proposed in question b have on Peterson's liquidity?

The Balance Sheet for Kinektic Co.is Presented Below