Company A has total current assets equal to $10,000 and working capital of $5,000.Company B has the same amount of working capital,but it has total current assets of $1,000,000.The company with the better working capital position is:
A) They both have equally good working capital positions.
B) Company B
C) Company A
D) no comparison possible

Question

Quizplus · Accepted Answer

Working capital is calculated by subtracting current liabilities from current assets. 
Thus, Company A has a higher ratio of working capital to total current assets, which indicates a better working capital position than Company B. Even though Company B has a higher amount of current assets, it also has a higher amount of current liabilities, which reduces its working capital position. Therefore, the best choice is C: Company A.

Company a Has Total Current Assets Equal to $10,000 and Working