Question

question 5 (10 points)
working capital includes which of the following?
deferred expenses and depreciation
current assets and current liabilities
owners capital and cash
accounts receivables and owners withdrawal

question 6 (10 points)
what is the current ratio given the following information?
current assets = $477.50
inventory = $275
current liabilities = $1075
0.70
0.45
0.33
0.60

Explanation:

Define Working Capital components

Using the Working Capital knowledge point, we identify the components used in its calculation. Working capital measures a company's short-term financial health and operational efficiency. It is calculated as:

$$ \text{Working Capital} = \text{Current Assets} - \text{Current Liabilities} $$

Therefore, working capital includes Current Assets and Current Liabilities.

Calculate the Current Ratio

Using the Current Ratio knowledge point, we apply the standard formula:

$$ \text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}} $$

We are given:

• \(\text{Current Assets} = \$477.50\)
• \(\text{Current Liabilities} = \$1075\)

Substituting these values into our formula:

$$ \text{Current Ratio} = \frac{477.50}{1075} \approx 0.4442 $$

Rounding to two decimal places gives \(0.44\), which is closest to the option \(0.45\).

Answer:

Question 5

• Deferred expenses and Depreciation
• Current assets and Current liabilities (Correct answer)
• Owner's Capital and Cash
• Accounts Receivables and Owner's Withdrawal

Question 6

• 0.70
• 0.45 (Correct answer)
• 0.33
• 0.60