A Company with Working Capital of $720,000 and a Current

question 64

Multiple Choice

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

• A) $845,000
• B) $595,000
• C) $720,000
• D) $125,000

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Definitions:

Transactions

Business activities or events that involve the exchange of goods, services, money, or a promise of any of these.

Debit

An accounting entry that increases asset or expense accounts, or decreases liability, equity, or revenue accounts.

Credit

Amount entered on the right side of an account.

Adjusting Entry

Journal entries made in accounting records at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.