Question

17-3 17-06

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				$387,600			$291,200
Marketable securities				448,800			327,600
Accounts and notes receivable (net)				183,600			109,200
Inventories				950,400			729,600
Prepaid expenses				489,600			466,400
	Total current assets			$2,460,000			$1,924,000
Current liabilities:
Accounts and notes payable
	(short-term)			$348,000			$364,000
Accrued liabilities				252,000			156,000
	Total current liabilities			$600,000			$520,000

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

Calculate following :

	Current year	Previous year
Working capital	2460000-600000 = 1860000	1924000-520000 = 1404000
Current ratio	2460000/600000 = 4.1:1	1924000/520000 = 3.7:1
Quick ratio	(2460000-950400-489600)/600000 = 1.7:1	(1924000-729600-466400)/520000 = 1.4:1

b) The liquidity of Nilo has Favorable

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.