Homework Answers
Solution:
Current ratio = Current Assets / Current liablities
2016 = $2,000 / $3,000 = 0.67
2015 = $2,100 / $2,900 = 0.72
Net Working Capital:
2016 = Current Assets - Current Liablities = $2,000 - $3,000 = ($1,000)
2015 = $2,100 - $2,900 = ($800)
From above it is very clear company's working capital position is very poor, it is having negative working capital in both year 2016 and 2015. Even situation become more worse in 2016 as negative value of working capital got increased as compared from 2015.
No, company's ability to pay its current liabilities not improved over the two years, even it become worse as current ratio of 2016 is lower than 2015. Further working capital is also negative.
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The following information relates to SE10-5 through SE10-7: SMITH & SONS, INC. Income Statement For Years...
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