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 $414,000 $320,000 Marketable securities 496,800 336,000 Accounts and notes receivable (net) 619,200 464,000 Inventories 351,900 272,000 Prepaid expenses 188,100 208,000 Total current assets $2,070,000 $1,600,000 Current liabilities: Accounts and notes payable (short-term) $675,000 $600,000 Accrued liabilities 225,000 200,000 Total current liabilities $900,000 $800,000 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

Explanation / Answer

Current year Previous year Current Assets: cash 414000 320000 Marketable securities 496800 336000 Accounts receivables 619200 464000 Inventories 351900 272000 prepaid exp 188100 208000 Total 2070000 1600000 Current Liabilities: Accounts payable 675000 600000 Accrued liabilities 225000 200000 Total 900000 800000 *Working Capital : Current assets - Current liabilities current year 2070000 - 900000   =   1170000 Previous year 1600000 - 800000   = 800000 *Current Ratio:    Current assets / Current liabilities current year 2070000 / 900000   =   2.3 Previous year 1600000 / 800000   = 2 *Quick Ratio:   Quick assets / Current liabilities current year 1530000 / 900000 = 1.7 Previous year 1120000 / 800000 = 1.4 *Quick assts = current assets - inventories - prepaid expense current year 2070000 - 351900 -188100 = 1530000 Previous year 1600000 - -272000 -208000 = 1120000

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