The following data were taken from the balance sheet of Bock Suppliers Company:

Question

The following data were taken from the balance sheet of Bock Suppliers Company:

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 Cash $452,200 $366,000 Temporary investments 523,600 411,800 Accounts and notes receivable (net) 214,200 137,200 Inventories 646,800 409,300 Prepaid expenses 333,200 261,700 Total current assets $2,170,000 $1,586,000 Accounts and notes payable (short-term) $406,000 $427,000 Accrued liabilities 294,000 183,000 Total current liabilities $700,000 $610,000

Explanation / Answer

Working Capital = Current assets - Current Liabilities Current Year Previous Year Current assets $2,170,000 $1,586,000 Current Liabilities $700,000 $610,000 Working Capital   $1,470,000 $976,000 Current Ratio = Current assets / Current Liabilities Current Year Previous Year Current assets $2,170,000 $1,586,000 Current Liabilities $700,000 $610,000 Current Ratio                     3.10                      2.60 Quick Ratio = Total Current assets except inventories / Current Liabilities Current Year Previous Year Current assets (except inventories) $1,523,200 $1,176,700 Current Liabilities $700,000 $610,000 Quick Ratio                     2.18                      1.93

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