The following data were taken from the balance sheet of Nilo Company at the end

Question

The following data were taken from the balance sheet of Nilo Company at the end of two recent fiscal years:

a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place.

b. The liquidity of Nilo has from the preceding year to the current year. The working capital, current ratio, and quick ratio have all . Most of these changes are the result of an in current assets relative to current liabilities.

Current Year Previous Year Current assets:   Cash $492,500 $403,200   Marketable securities 570,200 453,600   Accounts and notes receivable (net) 233,300 151,200   Inventories 617,800 422,700   Prepaid expenses 318,200 270,300   Total current assets $2,232,000 $1,701,000 Current liabilities:   Accounts and notes payable   (short-term) $417,600 $441,000   Accrued liabilities 302,400 189,000   Total current liabilities $720,000 $630,000

Explanation / Answer

current year previous year a)Working Capital(WN.1)          1,512,000.00          1,071,000.00 b)Current Ratio(WN.2)                          3.10                          2.70 c)quick ratio(WN.3)                          1.80                          1.60 Ideal ratio of current ratio is 2:1 and quick ratio is 1:1. In both the years the ratio is morethan ideal ratio.When the current ratio is increasing morethan ideal ratio ,there is a chance that more funds will be blocked in current assets. Working Note 1:- WORKING CAPITAL TOTAL CURERENT ASSETS          2,232,000.00          1,701,000.00 LESS:Current liabilities             720,000.00             630,000.00 Working Capital          1,512,000.00          1,071,000.00 Working Note 2:- Current ratio Current assets/Current liabilities                          3.10                          2.70 Working Note 2:- Quick ratio Quick assets/Current liabilities quick assets=current assets-inventory-prepaid expense quick assets= current assets          2,232,000.00          1,701,000.00 Less:Stock             617,800.00             422,700.00 Less:Prepaid Expense             318,200.00             270,300.00 QUICK ASSETS          1,296,000.00          1,008,000.00 QUICK RATIO                          1.80                          1.60

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.