If the current ratio is 2 to 1 and current assets equal $200,000, how much is working capital?
A)$0
B)$100,000
C)$200,000
D)$300,000

Question

Quizplus · Accepted Answer

The current ratio is the ratio of current assets to current liabilities. If the current ratio is 2 to 1, it means that for every dollar of current liabilities, there are $2 of current assets. 
Therefore, current liabilities must be $100,000 ($200,000/2). 
Working capital is calculated by subtracting current liabilities from current assets. 
Working capital = $200,000 - $100,000 = $100,000. 
Therefore, the best choice is B, which is $100,000.

If the Current Ratio Is 2 to 1 and Current