Question

Using the Ratio formula table compute the following:

Liquidity and Solvency Analysis

All users of financial statements are interested in the ability of a company to do the following :

1. maintain Liquidity and solvency

which are normally assessed using the following

1. Current position analysis- Working capital, Current ratio and Quick ratio
2. Accounts receivable analysis-Accounts Receivable turnover and # of days sales in receivables
3. Inventory analysis- Inventory turnover, number of days’ sales in inventory
4. Ratio of Fixed Assets to long term liabilities
5. Ratio of Liabilities to Stock holders equity

1. Using the information given provide the Current Position analysis  (2014 and 2013)     

15 points

         Working Capital

          Current Ratio

          Quick ratio

__________________________2014__________________2013______________

Current Assets                  $550,000                                 $533,000

Current Liabilities            $210,000                                 $243,000

Quick assets                      $280,000                                 $244,700

Answer 1

Working Capital = Current Assets - Current Liabilities

Particulars	2014	2013
Current Assets	$ 5,50,000.00	$ 5,33,000.00
Current Liabilities	$ 2,10,000.00	$ 2,43,000.00
Working Capital	$ 3,40,000.00	$ 2,90,000.00

Current ratio = Current Assets / Current Liabilities

Particulars	2014	2013
Current Assets	$ 5,50,000.00	$ 5,33,000.00
Current Liabilities	$ 2,10,000.00	$ 2,43,000.00
Current ratio	2.62	2.19

Quick Ratio = Quick Assets/ Current Liabilities

Particulars	2014	2013
Quick Assets	$ 2,80,000.00	$ 2,44,700.00
Current Liabilities	$ 2,10,000.00	$ 2,43,000.00
Current ratio	1.33	1.01