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Chapter 4 Solution On Language of Business

Nkululeko J. Ntshanga owns a manganese ore mining business in South Africa and is seeking additional investment to fund planned expansion. Some potential investors are concerned the funds may be needed to address liquidity problems. Nkululeko provided financial statements showing current assets of R1,438,600 and current liabilities of R1,033,000. Calculations show a working capital of R405,600, current ratio of 1.39, and quick ratio of 1.22. The ratios indicate the company is not experiencing significant liquidity problems.

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Allen Babasa
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92 views2 pages

Chapter 4 Solution On Language of Business

Nkululeko J. Ntshanga owns a manganese ore mining business in South Africa and is seeking additional investment to fund planned expansion. Some potential investors are concerned the funds may be needed to address liquidity problems. Nkululeko provided financial statements showing current assets of R1,438,600 and current liabilities of R1,033,000. Calculations show a working capital of R405,600, current ratio of 1.39, and quick ratio of 1.22. The ratios indicate the company is not experiencing significant liquidity problems.

Uploaded by

Allen Babasa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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B-04.

09

Nkululeko J. Ntshanga owns a manganese ore mining business in South Africa. He is interested in attracting
additional investors to obtain financing for planned expansion. Some potential investors have expressed a
concern that money is really being sought to address liquidity problems being faced by Nkululeko's company.

To alleviate this concern Nkululeko provided the following complete list of assets and liabilities of the company.
The currency unit is the South African Rand. Use this information to determine the company's current assets,
current liabilities, working capital, current ratio, and quick ratio. Based on your calculations, does it appear that
the company is experiencing liquidity problems?

Accumulated Depreciation R 4,569,000


Prepaid Rent 45,800
Note Payable (due in 3 months) 100,000
Accounts Receivable 468,000
Accounts Payable 255,000
Patent 3,000,000
Cash 790,000
Supplies 134,800
Unearned Revenues 133,000
Equipment 8,777,600
Interest Payable 45,000
Loan Payable (due in 3 years) 1,500,000
Name:
B-04.09
Date: Section:

Current Assets Quick Assets Current Liabilities

Accumulated Depreciation R 4,569,000


Prepaid Rent 45,800 R 45,800
Note Payable (due in 3 months) 100,000 R 100,000
Accounts Receivable 468,000 468,000 R 468,000
Accounts Payable 255,000 255,000
Patent 3,000,000
Cash 790,000 790,000 790,000
Supplies 134,800 134,800
Unearned Revenues 133,000 133,000
Equipment 8,777,600
Interest Payable 45,000 45,000
Loan Payable (due in 3 years) 1,500,000 500000

1,438,600 1,258,000 1,033,000

Working Capital :
405,600

Current Ratio:
1.392642788

Quick Ratio:
1.21781219748

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