Question

These selected condensed data are taken from a recent balance sheet of Bob Evans Farms (in millions of dollars).

Cash $ 29.3
Accounts receivable 20.5
Inventory 28.7
Other current assets
24.0

Total current assets $102.5
Total current liabilities $201.2


Compute working capital and the current ratio. (If answer is negative enter it with a negative sign preceding the number e.g. -15,000 or in parenthesis e.g. (15,000). Round Current Ratio to 2 decimal places, e.g. 0.78 : 1.)

Working capital $These selected condensed data are taken from a rec
Current ratio These selected condensed data are taken from a rec :1

Answer 1

Working capital is ($98.7) in millions

Current ratio is 0.51:1

Step-by-step explanation:

Working Capital is the difference between current assets and current liabilities. So, $102.5 (in milions) less $202.2 (in millions) equals ($98.7) in millions. This means, the company's short-term obligation exceeds its current asset for the period.

Current ratio also known as liquidity ratio. It measures the company's capacity to pay short-term obligation. To compute current ratio we simply divide current assets over current liabilities.

Current Assets / Current Liabilities

$102,500,000 / $201,200,000

0.509443 or 0.51 : 1