Current Position Analysis The following data were taken from the balance sheet of Nilo Company at the...

3.7 Ratings (380 Votes)

a.	Current Year ($)	Previous Year ($)
Working Capital	1400000	793000
Current ratio	3 times	2.3 times
Quick ratio	1.6 times	1.3 times


b. The liquidity of Nilo is Increased from the preceeding year to the current year.
The working capital, current ratio and quick ratio all have increased.
Most of these changes are the result of an increase in current assets relative to current liabilities.


Explanation:
Working Capital=	Current assets- Current Liabilities
Current year	$ 2100000-700000
	1400000

Previous Year	$ 1403000-610000
	793000

Current Ratio=	Current Assets/ Current Liabilities
Current year	$ 2100000/700000
	3 times

Previous Year	$ 1403000/610000
	2.3 times

Quick Ratio=	Current Assets-Inventory-Prepaid Expenses/ Current Liabilities
Current year	$ 2100000-646800-333200/700000
	1.6 times

Previous Year	$ 1403000-372100-237900/610000
	1.3 times

It is assumed that account receivables are liquid assets.

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		Current Year	Previous Year
Current assets:
Cash		$425,600	$317,200
Marketable securities		492,800	356,900
Accounts and notes receivable(net)		201,600	118,900
Inventories		646,800	372,100
Prepaid expenses		333,200	237,900
	Total current assets	$2,100,000	$1,403,000
Current liabilities:
Accounts and notes payable
	(short-term)	$406,000	$427,000
Accrued liabilities		294,000	183,000
	Total current liabilities	$700,000	$610,000