Question
In: Accounting
The following data were taken from the balance sheet of Nilo Company at the end of...
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 | $424,100 | $324,000 | ||||||
| Marketable securities | 491,000 | 364,500 | ||||||
| Accounts and notes receivable (net) | 200,900 | 121,500 | ||||||
| Inventories | 982,100 | 658,800 | ||||||
| Prepaid expenses | 505,900 | 421,200 | ||||||
| Total current assets | $2,604,000 | $1,890,000 | ||||||
| Current liabilities: | ||||||||
| Accounts and notes payable | ||||||||
| (short-term) | $359,600 | $378,000 | ||||||
| Accrued liabilities | 260,400 | 162,000 | ||||||
| Total current liabilities | $620,000 | $540,000 | ||||||
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.
Solutions
Expert Solution
Answer a.
Current Year:
Working Capital = Current Assets - Current Liabilities
Working Capital = $2,604,000 - $620,000
Working Capital = $1,984,000
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $2,604,000 / $620,000
Current Ratio = 4.20
Quick Ratio = (Current Assets - Inventories - Prepaid Expenses)
/ Current Liabilities
Quick Ratio = ($2,604,000 - $982,100 - $505,900) / $620,000
Quick Ratio = 1.80
Previous Year:
Working Capital = Current Assets - Current Liabilities
Working Capital = $1,890,000 - $540,000
Working Capital = $1,350,000
Current Ratio = Current Assets / Current Liabilities
Current Ratio = $1,890,000 / $540,000
Current Ratio = 3.50
Quick Ratio = (Current Assets - Inventories - Prepaid Expenses)
/ Current Liabilities
Quick Ratio = ($1,890,000 - $658,800 - $421,200) / $540,000
Quick Ratio = 1.50
Answer b.
The liquidity of Nilo has improved from the preceding year to the current year. The working capital, current ratio, and quick ratio have all increased. Most of these changes are the result of an increase in current assets relative to current liabilities.
ekkarill92 answered 2 years agoRelated Solutions
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Previous Year
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$268,800
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394,200
302,400
Accounts and notes receivable
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161,300
100,800
Inventories
1,056,000
683,200
Prepaid expenses
544,000
436,800
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$392,000
Accrued liabilities
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344,100
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Accounts and notes receivable
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140,700
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880,400
658,800
Prepaid expenses
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$1,640,000
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Accrued liabilities
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Total current liabilities
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Marketable securities
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Accounts and notes receivable
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217,200
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Inventories
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Accrued liabilities
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Inventories
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Accounts and notes receivable
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Inventories
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Prepaid expenses
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393,100
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Marketable securities
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Accounts and notes receivable
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198,700
117,000
Inventories
683,100
475,800
Prepaid expenses
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Marketable securities
492,800
356,900
Accounts and notes receivable
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201,600
118,900
Inventories
646,800
372,100
Prepaid expenses
333,200
237,900
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$1,403,000
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$427,000
Accrued liabilities
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183,000
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Accounts and notes receivable
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93,600
Inventories
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Prepaid expenses
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374,400
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