Dunn sports goods is a retailer of athletic footwear and clothing
Dunn’s working capital = Current Assets – Current Liabilities
As of December 31, 2009
Current Assets = $4,000.
Current Liabilities equal $1,500
Therefore, Dunn’s Working Capital = 4,000 – 1,500 = 2,500.
The current ratio is a liquidity ratio that measures a company’s ability to pay short-term and long-term debts. The current ratio is calculated by multiplying the current assets and liabilities. As of December 31, 2009:
Current Ratio = 4,000/1,500 = 2.67.
As of December 31, 2009, these ratios show that Dunn was able to meet its short-term obligations due as a result of having sufficient liquid assets. Dunn’s working capital shows they have more than sufficient resources (current assets) available to cover liabilities, even after accounting for expenses. The current ratio also shows they have twice as much liquid assets to cover all of their obligations if needed. Overall these two ratios demonstrate that Dunn was in a healthy financial position at this time which likely contributed to their continued success & growth going forward.