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The following information is available from the final accounts of Casey Ltd on 31/12/2009 - Leaving Cert Business - Question 2 - 2010

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The following information is available from the final accounts of Casey Ltd on 31/12/2009. Current Assets € 500,000 Current Liabilities € 200,000 Calculate: (i) T... show full transcript

Worked Solution & Example Answer:The following information is available from the final accounts of Casey Ltd on 31/12/2009 - Leaving Cert Business - Question 2 - 2010

Step 1

The Working Capital

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Answer

To calculate the Working Capital, we use the formula:

extWorkingCapital=extCurrentAssets−extCurrentLiabilities ext{Working Capital} = ext{Current Assets} - ext{Current Liabilities}

Substituting the values:

extWorkingCapital=€500,000−€200,000=€300,000 ext{Working Capital} = €500,000 - €200,000 = €300,000

Step 2

The Working Capital Ratio

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Answer

To determine the Working Capital Ratio, the formula is:

ext{Working Capital Ratio} = rac{ ext{Current Assets}}{ ext{Current Liabilities}}

Substituting the values:

ext{Working Capital Ratio} = rac{€500,000}{€200,000} = 2.5 : 1

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