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Current Year Previous Year Current assets:   Cash $387,600 $291,200   Marketable securities 448,800 327,600   Accounts and notes...

Current Year Previous Year
Current assets:
  Cash $387,600 $291,200
  Marketable securities 448,800 327,600
  Accounts and notes receivable (net) 183,600 109,200
  Inventories 475,200 348,900
  Prepaid expenses 244,800 223,100
  Total current assets $1,740,000 $1,300,000
Current liabilities:
  Accounts and notes payable
  (short-term) $348,000 $364,000
  Accrued liabilities 252,000 156,000
  Total current liabilities $600,000 $520,000

a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place.

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Answer #1

Answer :- Calculation of the Ratios for each year :-

A. Working Capital = Current Assets - Current liabilities

Current year = $1,740,000 - $600,000 = $1,140,000

Previous year = $1,300,000 - $520,000 = $780,000

B. Current Ratio = Current Assets / Current Liabilities

Current year = $1,740,000 / $600,000 = 2.9

Previous year = $1,300,000 / $520,000 = 2.5

C. Quick Ratio = Quick assets / Current Liabilities

Current year = $1,020,000 / $600,000 = 1.7

Previous year = $728,000 / $520,000 = 1.4

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