Current Position Analysis The following data were taken from the balance sheet o

Question

Current Position Analysis 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 $356,400 412,700 168,900 1,149,700 592,300 $2,680,000 $278,400 313,200 104,400 813,700 520,300 $2,030,000 Accounts and notes receivable (net) Prepaid expenses Total current assets Current liabilities: Accounts and notes payable $388,600 281,400 $670,000 $406,000 174,000 $580,000 short-term) Accrued liabilities 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 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.

Explanation / Answer

1 Working capital: Current year 2010000 =2680000-670000 Previous year 1450000 =2030000-580000 2 Current ratio: Current year 4 =2680000/670000 Previous year 3.5 =2030000/580000 3 Quick ratio: Current year 1.4 =(2680000-1149700-592300)/670000 Previous year 1.2 =(2030000-813700-520300)/580000 b The liquidity of NILO has increased from precding to current year. The working capital, current ratio and quick ratio all have increased. Most of the changes are the result of an increase in current assets relative to current liabilities.

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