Question

1. Complete the following balance sheet by calculating the correct value and filling in the blanks for a, b, and c (Fixed Assets, Intermediate Liabilities, Net Worth) Current Assets $250,895 Current Liabilities $232,421 Intermediate Assets $330,187 b. Dintermediate Liabilities a.) Fixed Assets Fixed Liabilities $560,973 Total Assets $1,456,828 Total Liabilities $1,025,456 c.) Net Worth Edit Insert Format Tools Table 12pt Paragraph | BIY ALTY a. $875746 because 1456828-250,895-330187 b. $232062 because 1025456-232421-560973 c.$431372 because 1456828-1025456
just need #23 answered

Answer 1

Calculation and Interpretation of Working Capital:

Working Capital = Current Assets – Current Liabilities

Here,

Working Capital = $250,895 - $232,421 = $18,474

Working Capital as a Measure of Liquidity:

Working Capital is a measure of company’s Liquidity, as it is the difference between Short Term Assets and Short Term Liabilities. Working Capital represents company’s ability to generate cash for its short term liabilities. Positive Working Capital states that the company has as much cash required to pay off its short term liabilities in the coming period. Liquidity is the measure of availability of cash for paying dues. Working Capital represent the liquid assets of the company that it can utilize for paying off its debt.

Working Capital for given case:

Working Capital for the farm is $18,474. As Working Capital is Positive, it can be interpreted that the farm has enough liquid assets to pay off it’s short term dues on time. It shows that the company is holding more Current Assets than it’s Current Liabilities.

Working Capital:

Working Capital is calculated by subtracting Current Liabilities from Current Assets.

Current assets include cash and cash equivalents, accounts receivables, short term investments, invnetory, prepaid expenses etc. Only those assets which can be readily converted into cash are considered as Current Assets.

Current liabilities include liabilities due within 12 months, accounts and expenses payable, deferred revenues etc.

Working Capital reflects the operational efficiency of the company.