Selected condensed data taken from a recent balance sheet of Perkins Inc. are as

Question

Selected condensed data taken from a recent balance sheet of Perkins Inc. are as follows.
PERKINS INC.

Balance Sheet (partial)

Cash $ 8,041,000
Short-term investments 4,947,000
Accounts receivable 12,545,000
Inventories 14,814,000
Other current assets
5,571,000

Total current assets
$45,918,000

Total current liabilities
$40,644,000


What are the (a) working capital, (b) current ratio, and (c) acid-test ratio? (Round ratios to 2 decimal places, e.g. 10.50.)

(a) Working capital $
(b) Current ratio : 1
(c) Acid-test ratio : 1

Explanation / Answer

a. working capital = CA - CL = 45,918,000 - 40,644,000 = $5,274,000

b. current ratio = CA/CL = 45,918,000/40,644,000 = 1.13:1

c. acid test ratio = (cash + short term investment + AR)/CL= 8041000 +4947000 + 12545000/40644000 = 0.63:1

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