Question
1- discusses several professional certifications related to accounting. What two professional certifications does your professor have? 2- Working Capital is the excess of the current
1- discusses several professional certifications related to accounting. What two professional certifications does your professor have?
2- Working Capital is the excess of the current assets of a business over its current liabilities:
Working Capital = Current Assets Current Liabilities
Positive working capital implies that a business is able to pay its current liabilities and is solvent.
The Current Ratio is another means of expressing the relationship between current assets and current liabilities, computed by dividing Current Assets by Current Liabilities: Current Ratio = Current Assets/Current Liabilities (pages 93-94 on your text)
Historically, companies had considered a current ratio of 2.00:1 to be adequate. In recent years, companies have considered a current ratio in the range of 1.10:1 to 1.30:1 to be adequate by improving management of their current assets and liabilities. A current ratio that is less than 1.00:1 is considered to be dangerous as it indicates that the company may have difficulties paying its bills when they become due.
The following data (in millions) are taken from financial statements for General Motors:
as of 12/31/2016 as of 12/31/2015
Current Assets $76,203 $78,007
Current Liabilities $85,181 $71,466
- Compute the working capital as of Dec. 31, 2016 and Dec. 31, 2015.
- Compute the current ratio as of Dec. 31, 2016 and Dec. 31, 2015. Round to 2 decimal places.
- What conclusions concerning General Motors ability to meet its financial obligations can you draw from parts (a) and (b)?
3- Trinity College sold season tickets for the 2019 football season for $315,000. A total of 7 games will be played during September, October and November. In September, three games were played. In October, two games were played. What is the balance in Unearned Ticket Revenue as of October 31 (after adjusting entries has been made)?
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