Question

Working Capital and Current Ratio The following data (in thousands) were taken from recent financial statements of Under Armour, Inc.: December 31 Year 2 Year 1 Current assets $1,498,763 $1,549,399 Current liabilities 478,810 421,627 a. Compute the working capital and the current ratio as of December 31, Year 2 and Year 1. Enter working capital amounts in thousands of dollars. Round "current ratio" answers to two decimal places.

Answer 1

Answer:

Working Capital

Year 1 =  $1127772

Year 2 = $1019953

Current Ratio

Year 1 = 3.67

Year 2 =  3.13

Explanation:

Working capital is a measure of operating liquidity of a business. It is the capital that is required for the day to day operations of a business. Working Capital can be calculated as follows,

Working Capital =  Current Assets - Current liabilities

Working Capital:

Year 1 = 1549399 - 421627          = $1127772

Year 2 = 1498763 - 478810          = $1019953

Current Ratio is a financial measure of the liquidity of a business. It measures the company's ability to meet its short term debts. It tells how much $ current assets are available to pay off $1 of current liability It is calculated as follows,

Current ratio = Current Assets / Current Liabilities

Current Ratio:

Year 1 = 1549399 / 421627        = 3.67

Year 2 = 1498763 / 478810        = 3.13