Working capital is current assets minus current liabilities. The current ratio is current assets divided by current liabilities. Because both working capital and the current ratio use the same amounts, it is not possible for working capital to increase while the current ratio decreases. If one increases, the other must also increase; and if one decreases, the other must also decrease.
Working capital and the current ratio will not remain unchanged. Cash will be affected, and cash is a current asset that affects both working capital and the current ratio.
Working capital is calculated as the current assets minus the current liabilities. The current ratio is calculated as current assets divided by current liabilities. If the company issues shares for cash, current assets will increase and current liabilities will be unchanged. This will cause working capital to increase and the current ratio to increase.
Working capital is current assets minus current liabilities. The current ratio is current assets divided by current liabilities. Because both working capital and the current ratio use the same amounts, it is not possible for one of them to change while the other remains unchanged.
|
