If Crab Shack Company has a current ratio of 2.5 and current assets of $195,000, the amount of working capital is:
A)$117,000
B)$330,000
C)$380,000
D)$78,000

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. With a current ratio of 2.5 and current assets of $195,000, current liabilities are $195,000 / 2.5 = $78,000. Working capital is current assets minus current liabilities, which is $195,000 - $78,000 = $117,000.

If Crab Shack Company Has a Current Ratio of 2