The Robinson Company has the following current assets and current liabilities fo

Question

The Robinson Company has the following current assets and current liabilities for these two years: 2014 2015 Cash and marketable securities $50,000 $50,000 Accounts receivable 300,000 350,000 Inventories 350,000 500,000 Total current assets $700,000 $900,000 Accounts payable $200,000 $250,000 Bank loan 0 150,000 Accruals 150,000 200,000 Total current liabilities $350,000 $600,000 a. Compare the current ratios between the two years. b. Compare the acid-test ratios between 2014 and 2015. Comment on your fi ndings.

Explanation / Answer

Compare the current ratios between the two years.
2014: $700,000/$350,000 = 2.0
2015: $900,000/$600,000 = 1.5
Liquidity as measured by the current ratio, fell in 2015.
b. Compare the acid-test ratios between 2014 and 2015. Comment on your findings.
2014: ($700,000

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