Year 2 Year 1
Current assets $4,352,700 $4,168,700
Current liabilities 3,653,500 3,038,700
a. Compute the working capital and the current ratio for Year 2 and Year 1. Round to two decimal places.
b. What conclusions concerning the company’s ability to meet its financial obligations can you draw from part (a)?
Answers:
a.
Current assets...............
Current liabilitites............
Working capital...............
Current ratio..................
b. Starbucks’ working capital declined (decreased) from Year 1 to Year 2 by
$430,800 ($699,200 – $1,130,000). Starbucks’ current ratio also declined
(decreased) from 1.37 in Year 1 to 1.19 in Year 2. The decline in working capital
and current ratio indicate a concern for short-term creditors; however, Starbucks
is still in a strong liquidity position.