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				$492,500			$403,200
Marketable securities				570,200			453,600
Accounts and notes receivable (net)				233,300			151,200
Inventories				617,800			422,700
Prepaid expenses				318,200			270,300
	Total current assets			$2,232,000			$1,701,000
Current liabilities:
Accounts and notes payable
	(short-term)			$417,600			$441,000
Accrued liabilities				302,400			189,000
	Total current liabilities			$720,000			$630,000

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
	Current Year	Previous Year
Total current assets	2232000	1701000
Less: Total current liabilities	720000	630000
1. Working capital	1512000	1071000
	Current Year	Previous Year
Total current assets	2232000	1701000
Divide by Total current liabilities	720000	630000
2. Current ratio	3.1	2.7
	Current Year	Previous Year
Cash	492500	403200
Marketable securities	570200	453600
Accounts and notes receivable (net)	233300	151200
Total quick assets	1296000	1008000
Divide by Total current liabilities	720000	630000
3. Quick ratio	1.8	1.6
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.