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You have inherited money from your grandparents, and a friend suggests that you consider buying shares in Galena Ski Products, which manufactures skis and bindings. Because you may need to sell the shares within the next two years to finance your university education, you start your analysis of the company data by calculating (1) working capital, (2) the current ratio, and (3) the quick ratio.

Current assets
Cash	$ 154,000
Inventory	185,000
Prepaid expenses	21,000
Non-current assets
Land	50,000
Building and equipment	145,000
Other	15,000
Total	$ 570,000
Current liabilities	165,000
Long-term debt	190,000
Share capital	80,000
Retained earnings	135,000
Total	$ 570,000

a) What amount of working capital is currently maintained? Comment on the adequacy of this amount.

b) Your preference is to have a quick ratio of at least 0.80 and a current ratio of at least 2.00. How do the existing ratios compare with your criteria? Based on these two ratios, how would you evaluate the companys current asset position?

c) The company currently sells only on a cash basis and had sales of $900,000 this past year. How would you expect a change from cash to credit sales to affect the current and quick ratios?

d) Galenas statement of financial position is presented just before the company begins making shipments to retailers for its fall and winter season. How would your evaluation change if these balances existed in late February, following the completion of its primary business for the skiing season?

e) How would Galenas situation as either a public company or a private company affect your decision to invest?

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