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				$483,400			$386,400
Marketable securities				559,700			434,700
Accounts and notes receivable (net)				228,900			144,900
Inventories				664,600			477,000
Prepaid expenses				342,400			305,000
	Total current assets			$2,279,000			$1,748,000
Current liabilities:
Accounts and notes payable
	(short-term)			$307,400			$322,000
Accrued liabilities				222,600			138,000
	Total current liabilities			$530,000			$460,000

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.

Answer 1

a) Calculate following

	Current year	Previous year
Working capital (Current assets-Current liabilities)	2279000-530000 = 1749000	1748000-460000 = $1288000
Current ratio (Current assets/Current liabilities)	2279000/530000 = 4.30 Times	1748000/460000 = 3.80 Times
Quick ratio (Quick assets/Current liabilities)	(2279000-664600-342400)/530000 = 2.40 Times	(1748000-477000-305000)/460000 = 2.10 Times

b) The liquidity of Nilo has improve 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 relation in current assets relative to current liabilities