gagement Exerc eBook Video Calculator Analysis of Liquidity Based on the compara

Question

gagement Exerc eBook Video Calculator Analysis of Liquidity Based on the comparative income statement and balance sheet of Cowan Kitchen Counters, Inc., that follow: Cowan Kitchen Counters, Inc. Comparative Income Statement For Years Ended December 31, 20-2 and 20-1 20-2 20-1 Net Sales (all on account) Cost of goods sold Gross proft Operating expenses Other expense (interest) Income tax expense $2,586,000 1,878,900 $707,100 313,800 24,200 178,900 $190,200 $2,161,700 1,617,600 $544,100 211,800 24,200 104,800 $203,300 Net income Cowan Kitchen Counters, Inc. Comparative Balance Sheet December 31, 20-2 and 20-1 20-2 20-1 $258,900 $241,200 Cash Government notes Accounts receivable (net) 250,900 250,900 909,600 797,300 Previous Check My Work 1 more Check My Work uses iemaining 1 more Check My Work uses remaining ms

Explanation / Answer

Quick ratio = Quick Assets / Current liabilities

Quick Assets = Cash + Government notes + Accounts Receivable = 258900+250900+909600 = $ 1,419,400/-

Current liabilities is = $ 701,100

Quick ratio is = (1419400/701100) = 2.02 Times.

Current ratio = Current assets/ Current liabilities

Current assets is = Quick assets + Inventory + Supplies and prepayment = 1419400+990500+143100 = $ 2,553,000/-

Current liabilities is = $ 701,100/-

Current ratio is = (2553000/701100) = 3.64 times

Working capital is = Current assets - Current liabilities = $ 2553000-701100 = $ 1,851,900/-

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