Question

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 $391,000 $300,000 Marketable securities 515,000 354,000 Accounts and notes receivable (net) 634,000 426,000 Inventories 368,000 222,000 Prepaid expenses 182,000 138,000 Total current assets $2,090,000 $1,440,000 Current liabilities: Accounts and notes payable (short-term) $725,000 $600,000 Accrued liabilities 275,000 300,000 Total current liabilities $1,000,000 $900,000 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

Answer 1

Answer:

Explanation:

 

1)Working Capital = Current Assets - Current Liabilities

Current Year = = 2,090,000 – 1,000,000 = $1,090,000

Previous Year = 1,440,000 – 900,000 = $540,000

2)Current Ratio = Current Assets / Current Liabilities

Current Year = 2,090,000 / 1,000,000 = 2.09

Previous Year = 1,440,000 / 900,000 = 1.60

3)Quick Ratio = (Current Assets - Inventories - Prepaid Expenses) / Current Liabilities

Current Year = (2,090,000 – 368,000 – 182,000)/ 1,000,000 = 1.54

Previous Year = (1,440,000 – 222,000 – 138,000) / 900,000= 1.20

Answer 2

Answer:

1) Working Capital = A-B  1,090,000.00   540,000.00  

2Current Ratio = Current Asset/Current Libilities = A/B

Equals  1.9:1    2.7:1  

3)  1.5:1   1.2:1  

Explanation:

 Prev Year   Current Year  

Cash  391,000.00   300,000.00  

MKt Securities  515,000.00   354,000.00  

Account Rec  634,000.00   426,000.00  

Inventories  368,000.00   222,000.00  

Prep Exp  182,000.00   138,000.00  

A =  Total Current Assets  2,090,000.00   1,440,000.00  

C = Quick Assets = Cash + Marketable Securities + Account Receivable   1,540,000.00   1,080,000.00  

 

Account Payable  725,000.00   600,000.00  

Accrued  275,000.00   300,000.00  

B = total Current Liabilities   1,000,000.00   900,000.00  

Working Capital = A-B  1,090,000.00   540,000.00  

Current Ratio = Current Asset/Current Libilities = A/B  1.92   2.67  

Equals  1.9:1    2.7:1  

Quick Assets Ratio Quick Assets/ Current Liabilities =  C/B  1.54   1.20  

=  1.5:1   1.2:1