NWC, Current Ratio, and Risk

Calculate the Net Working Capital for each of the following scenarios

Current Assets	Current Liabilities	Net Working Capital	Risk Rating (1-4, with 1 being the most risky)
$1,000	2,000
$1,000	750
$1,000	1,500
$1,000	400

Calculate the Current Ratios for each of the scenarios. SHOW WORK. Current Ratio = CA/CL

Current Ratio	Risk Rating (1-4, with 1 being the most risky)
A
B
C
D

The higher the NWC, the _________________________ (lower or higher) the risk of becoming technically insolvent.

The higher the Current Ratio, the _________________________ (lower or higher) the risk of becoming technically insolvent.

The lower the NWC, the _________________________ (lower or higher) the risk of becoming technically insolvent.

The lower the Current Ratio, the _________________________ (lower or higher) the risk of becoming technically insolvent.

What is the relationship between the liquidity ratios (NWC and the Current Ratio) and risk? Remember that RISK is the risk of becoming technically insolvent.