Financial Analysis: Working Capital, Current Ratio, and Quick Ratio Working capi

Question

Financial Analysis: Working Capital, Current Ratio, and Quick Ratio Working capital, current ratio, quick ratio Gamestop Corporation has over 6,000 retail stores worldwide and sells new and games. The following asset and liability data (in millions) were adapted from recent financial statements. Working capital, current ratio, quick ratio Compute working capital for Years 2 and 1. Compute the current ratio for Years 2 anti 1. Round to one decimal place. Compute the quick ratio for Years 2 and 1. Round to one decimal place. Analyze and assess any changes in liquidity for Years 2 and 1. Comment on any competitive pressures that you think GameStop may be experiencing.

Explanation / Answer

1 Working Capital = Current Assets - Current Liabilities =1997-1634 =2155-1748 363 407 2 Current Ratio = Current Asset/Current Liabilities =1997/1634 =2155/1748 1.22 1.23 3 Quick Ratio = Quick Asset/ Quick Liabilities =(655+109)/1634 = (711+94)/1748 0.47 0.46 4 In year 1 working capital was 407 and in year 2 working capital is 363 So working capital decreased by $44 Also the Current Ratio is decreased to 1.22 from 1.22 5 Genearelly current ratio in industry is 2 and quich ratio is 1 So company's current ratio is below 2 and quick ratio is below 1 So company is not in good condition

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