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				$335,200			$275,200
Marketable securities				388,100			309,600
Accounts and notes receivable (net)				158,700			103,200
Inventories				776,200			498,400
Prepaid expenses				399,800			318,600
	Total current assets			$2,058,000			$1,505,000
Current liabilities:
Accounts and notes payable
	(short-term)			$284,200			$301,000
Accrued liabilities				205,800			129,000
	Total current liabilities			$490,000			$430,000

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

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

b. 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 an   in current assets relative to current liabilities.

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Answer 1

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

			Current Year			Previous Year
1. Working capital	$2058000-490000 = 1568000			$1505000-430000 = 1075000
2. Current ratio	2058000/490000 = 4.2			1505000/430000 = 3.5
3. Quick ratio	882000/490000 = 1.8			688000/430000 = 1.6

b. 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 an increase in current assets relative to current liabilities.