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.
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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