Question

(Analysis of assets)
You have inherited money from your grandparents, and a friend suggests that you consider buying shares in Galena Ski Products, which manufactures skis and bindings. Because you may need to sell the shares within the next two years to finance your university education, you start your analysis of the company data by calculating (1) working capital, (2) the current ratio, and (3) the quick ratio. Galena’s statement of financial position is as follows:

Current assets
Cash		$147,100
Inventory		166,600
Prepaid expenses		22,900
Non-current assets
Land		46,700
Building and equipment		150,300
Other		14,600
Total		$548,200
Current liabilities		$156,100
Long-term debt		173,000
Share capital		83,700
Retained earnings		135,400
Total		$548,200

What amount of working capital is currently maintained?

Working capital

$

Your preference is to have a quick ratio of at least 0.80 and a current ratio of at least 2.00. How do the existing ratios compare with your criteria? (Round answers to 2 decimal places, e.g. 18.42.)

Current ratio		Does not exceed the criteriaExceeds the criteria
Quick ratio		Does not exceed the criteriaExceeds the criteria

Answer 1

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