Question

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				$663,600			$528,900
Marketable securities				874,000			624,100
Accounts and notes receivable (net)				1,076,000			751,000
Inventories				1,139,300			880,500
Prepaid expenses				563,500			547,500
	Total current assets			$4,316,400			$3,332,000
Current liabilities:
Accounts and notes payable (short-term)				$957,000			$793,400
Accrued liabilities				363,000			396,600
	Total current liabilities			$1,320,000			$1,190,000

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

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

   			Current Year			Previous Year
   1. Working capital	$			$
   2. Current ratio
   3. Quick ratio

2. 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 a(n)   in current assets relative to current liabilities.

Answer 1

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

   			Current Year			Previous Year
   1. Working capital	$4316400-1320000 = 2996400			$3332000-1190000 = 2142000
   2. Current ratio	3.3			2.8
   3. Quick ratio	2613600/1320000 = 2.0			1.6

2. The liquidity of Nilo has improved from the preceding year to the current year. The working capital, current ratio, and quick ratio have all liquidity ratio . Most of these changes are the result of a(n) increase in current assets relative to current liabilities.