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Unformatted text preview: M9-2)Cash100,000Notes Payable, short-term100,000Interest Expense3,429Interest payable3,429E9-1)1) Working capital = 170,100 109,200 = 60,900Current ratio = (695,100 525,000) / (60,000 + 12,000 + 3,000 + 14,000 + 7,800 + 2,000 + 10,000 + 400) = 1. 5577Working capital is important to the managers because it has a significant impact on the health and profitability of the company. If the company has too little working capital, it would be risking its ability to meet its obligations to creditors. If the company has too much working capital then it might tie up resources in unproductive assets and incur unnecessary costs.Current ratio is used by financial analysts to indicate whether the company has the resources to pay its short-term debt. A ratio of 1 or higher shows that the company can pay for its short-term debt with the current assets it possesses. However, too high of a ratio may indicate that the company is not using its resources efficiently. The current ratio for Wilemon Co. is a solid the company is not using its resources efficiently....
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This homework help was uploaded on 02/19/2009 for the course HA 230 taught by Professor Davidlee during the Fall '06 term at Cornell University (Engineering School).
- Fall '06