Question

Current Position Analysis

The following data were taken from the balance sheet of Bock Suppliers Company:

				Current Year			Previous Year
Cash				$359,100			$264,000
Temporary investments				415,800			297,000
Accounts and notes receivable (net)				170,100			99,000
Inventories				1,205,800			872,300
Prepaid expenses				621,200			557,700
	Total current assets			$2,772,000			$2,090,000
Accounts and notes payable
	(short-term)			$365,400			$385,000
Accrued liabilities				264,600			165,000
	Total current liabilities			$630,000			$550,000

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

Answer 1

	Current year	previous year
1. working capital	2,142,000	1,540,000
2.current ratio	4.4	3.8
3.quick ratio	1.5	1.2

working notes:

	current year	previous year
1.working capital (total current assets - total current liabilities)	2,772,000- 630,000 =>2,142,000	1,540,000
2.current ratio (current assets / current liabilities)	(2,772,000/ 630,000)=>4.4	(2,090,000/550,000)=>3.80
3.quick ratio (current assets - inventories - prepaid expenses) / current liabilities	(2,772,000-1,205,800-621,200) / 630,000 =>1.5	(2,090,000-872,300-557,700) / 550,000 =>1.2