On December 31 2015 Company A reports total assets of 450000

On December 31, 2015, Company A reports total assets of $4,500,000 and total equity of $2,345,000. All liabilities are current (the company has no long-term debt). The company has a current ratio of 0.7. How much is the company\'s working capital? Select one: a. $1,508,500 b. $1,641,500 c. -$646,500 d. $3,078,571

Solution

Total Assets 4500000 Less: Total equities 2345000 Current liabilities 2,155,000 Current ratio: 0.70 Current ratio: Current Assets/ Current liabilities 0.70 = Current Assets /2155000 Current assets: $1508500 Workin capital = Current assets-Current liabilities 1508500-2155000 = - $ 646500 Answer is C. -$646500