Selected financial measures for short-term creditors

Reference no: EM13956035

Selected Financial Measures for Short-Term Creditors

Derivative Products had a current ratio of 2.0 on October 31 of the current year. On that date, the company's assets were as follows:

Cash	$80,000
Accounts receivable, net	450,000
Inventory	800,000
Prepaid expenses	10,000
Plant and equipment, net	2,000,000
Total assets	$3,340,000

Required:

1. What was the company's working capital on October 31?

2. What was the company's acid-test ratio on October 31?

3. The company purchased inventory for $60,000 immediately after October 31.

a. What effect did this transaction have on working capital? Show computations.

b. What effect did this transaction have on the acid-test ratio? Show computations.

Reference no: EM13956035

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