The comparative financial statements for Prince Company are below:
Year 2 Year 1
Income statement:
Sales revenue $ 190,000 $ 167,000
Cost of goods sold 112,000 100,000
Gross profit 78,000 67,000
Operating expenses and
interest expense 56,000 53,000
Pretax income 22,000 14,000
Income tax 8,000 4,000
Net income $ 14,000 $ 10,000
Balance sheet:
Cash $ 4,000 $ 7,000
Accounts receivable (net) 14,000 18,000
Inventory 40,000 34,000
Property and equipment (net) 45,000 38,000
Total assets $ 103,000 $ 97,000
Current liabilities (no interest) $ 16,000 $ 17,000
Long-term liabilities (10% interest) 45,000 45,000
Common stock ($5 par value, 6,000
shares outstanding) 30,000 30,000
Retained earnings 12,000 5,000
Total liabilities and stockholders'
equity $ 103,000 $ 97,000
By what amount did the current ratio change from Year 1 to Year 2
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Ответ:
It is increases by 0.155 times
Explanation:
As we know that
Current ratio = Current assets ÷ Current liabilities
where,
Current assets = Cash + account receivable + inventory
So in year 1, the current ratio is
= ($7,000 + $18,000 + $34,000) ÷ ($17,000)
= ($55,000) ÷ ($17,000)
= 3.47 times
And, in year 2 , the current ratio is
= ($4,000 + $14,000 + $40,000) ÷ ($16,000)
= ($58,000) ÷ ($16,000)
= 3.625 times
Therefore, it is increases by 0.155 times
Ответ: