Question 4.6: Working Capital and Current Ratio Two income statements for ......
Working Capital and Current Ratio
Two income statements for Fortson Company are shown below.
2012 2011
Current assets $310,500 $262,500
Current liabilities 172,500 150,000
a. Determine the working capital and current ratio for 2012 and 2011.
b. Does the change in the current ratio from 2011 to 2012 indicate a favorable or an unfavorable trend?
a.
2012 2011
Current assets $310,500 $262,500
Current liabilities \underline{172,500 } \underline{150,000}
Working capital \underline{\$ 138,000} \underline{\$ 112,500}
Current ratio 1.80 1.75
($310,500 ÷ $172,500) ($262,500 ÷ $150,000)
b. The change from 1.75 to 1.80 indicates a favorable trend.