Homework SourseThe following data were taken from the balance sheet of Nilo
The following data were taken from the balance sheet of Nilo Company at the end of two recent fiscal years:
a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place.
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.
| Current Year | Previous Year | |||||
| Current assets: | ||||||
| Cash | $297,200 | $224,000 | ||||
| Marketable securities | 344,100 | 252,000 | ||||
| Accounts and notes receivable (net) | 140,700 | 84,000 | ||||
| Inventories | 880,400 | 658,800 | ||||
| Prepaid expenses | 453,600 | 421,200 | ||||
| Total current assets | $2,116,000 | $1,640,000 | ||||
| Current liabilities: | ||||||
| Accounts and notes payable | ||||||
| (short-term) | $266,800 | $280,000 | ||||
| Accrued liabilities | 193,200 | 120,000 | ||||
| Total current liabilities | $460,000 | $400,000 |
Solution
a.
Working:
b. The liquidity of Nilo has increased from the preceding year to the current year. The working capital, current ratio, and quick ratio have all increased. Most of these changes are the result of an increase in current assets relative to current liabilities.
| Current Year | Previous Year | |
| 1. Working capital | $1,656,000 | $1,240,000 |
| 2. Current ratio | 4.6 | 4.1 |
| 3. Quick ratio | 1.7 | 1.4 |
