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: Current Year Previous Year Current assets: Cash $451,400 522,700 Accounts and notes receivable (net) 213,900 926,600 477,400 $2,592,000 $357,200 401,900 133,900 659,400 421,600 $1,974,000 Marketable securities Inventories Prepaid expenses Total current assets Current liabilities: Accounts and notes payable (short-term) Accrued liabilities $313,200 226,800 $540,000 $329,000 141,000 $470,000 Total current liabilities a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place Current Year Previous Year 1. Working capital 2. Current ratio 3. Quick ratio b. The liquidity of Nilo has and quick ratio have all current liabilities. from the preceding year to the current year. The working capital, current ratio, in current assets relative to . Most of these changes are the result of an

Explanation / Answer

Working Capital = Current Assets - Current Liabilities

Current Year = = 2592000 - 540000 = 2,052,000
Previous Year = 1974000 - 470000 = 1,504,000

Current Ratio = Current Assets / Current Liabilities

Current Year = 2592000 / 540000 = 4.8
Previous Year = 1974000 / 470000 = 4.2

Quick Capital = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities

Current Year = (2592000 - 926600 - 477400)/ 540000 = 2.2
Previous Year = (1974000 - 659400 - 421600) / 470000 = 1.9

b)
Liquidity of Nilo - Improved (or increased)
Ratio have all - Improved (or Increased)
Results of an Higher Increase in Current assets

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