A firm has a current assets of $800,000, current liabilities of $600,000. The firm uses $200,000 of its cash balance to pay off a current liabilities. Calculate the current ratio before and after this transaction.
A firm currently uses 50,000 workers to produce 120,000 units of output per day. The daily wage per worker is $100, and the price of the firm's output is $48. The cost of other variable inputs is $400,000 per day.
Assume that total fixed cost equals $900,000. Calculate the values for the following four formulas:
•Total Variable Cost = (Number of Workers x Worker's Daily Wage) + Other Variable Costs
•Average Variable Cost = Total Variable Cost / Units of Output per Day
•Average Total Cost = (Total Variable Cost + Total Fixed Cost) / Units of Output per Day
•Worker Productivity = Units of Output per Day / Number of Workers
To calculate the current ratio, we need to divide the current assets by the current liabilities. Let's calculate the current ratio before and after the transaction.
Before the transaction:
Current Assets = $800,000
Current Liabilities = $600,000
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $800,000 / $600,000
Current Ratio = 1.33
After the transaction:
We need to subtract the $200,000 used to pay off current liabilities from the current assets.
New Current Assets = Current Assets - Amount Used to Pay Off Current Liabilities
New Current Assets = $800,000 - $200,000
New Current Assets = $600,000
Current Liabilities remains the same at $600,000.
New Current Ratio = New Current Assets / Current Liabilities
New Current Ratio = $600,000 / $600,000
New Current Ratio = 1.00
Therefore, the current ratio before the transaction was 1.33, and after the transaction, it decreased to 1.00.