Current Position Analysis The following data were taken from

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 Marketable securities Accounts and notes receivable (net) $618,600 716,300 293,100 390,700 201,300 $512,000 576,000 192,000 195,200 124,800 Inventories Prepaid expenses Total current assets $2,220,000 $1,600,000 Current liabilities: Accounts and notes payable (short-term) $429,200 $448,000 Accrued liabilities 310,800 192,000 Total current liabilities $740,000 $640,000 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

Solution

Current year

Previous year

1. Working capital

$1480000

$960000

2. Current ratio

3

2.5

3. Quick ratio

2.2

2

Explanation;

1. Working capital for current year;

Total current assets – Total current liabilities

$2220000 – $740000 = $1480000

2. Working capital for previous year;

Total current assets – Total current liabilities

$1600000 – $640000 = $960000

3. Current ratio for current year;

Total current assets / Total current liabilities

$2220000 / $740000 = 3

4. Current ratio for previous year;

Total current assets / Total current liabilities

$1600000 / $640000 = 2.5

5. Quick ratio for current year;

Total quick assets / Total current liabilities

$1628000 / $740000 = 2.2

6. Quick ratio for previous year;

Total quick assets / Total current liabilities

$1280000 / $640000 = 2

	Current year	Previous year
1. Working capital	$1480000	$960000
2. Current ratio	3	2.5
3. Quick ratio	2.2	2