Question

You have inherited 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	$157,200
Inventory	194,00
Prepaid expenses	20,200
Non-current assets
Land	50,800
Building and equipment	146,700
Other	15,300
Total	$584,200
Current liabilies	$174,900
Long-term debt	198,100
Share capital	80,800
Retained earnings	130,400
Total	$584,200

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)

Current Ratio: ____ and (Does not exceed the criteria or exceeds the criteria)

Quick Ratio:_____ and (Does not exceed the criteria or exceeds the criteria)

Answer 1

Working Capital	=	Current asset- current liabitity
		=371400-174900
		196,500 The above is the current working Capital
Current Ratio	=	Current Assets/ Current Liabilty
		=371400/174900
		2.12
		Meets the criteria as its greater than 2
Quick Ratio	=	(Currrent Assets-Stock -Prepaid exp )/Current Liabilties
		=(371400-194000-20200)/174900
		=157200/174900
		0.90
		Meets the criteria as its greater than 0.80