Current assets and current liabilities for Brimstone Company follow:
2018 | 2019
Current assets. $1,586,250 | $1,210,000
Current liabilities. 705,000 | 550,000
a. Determine the working capital and current ratio for 2019 and 2018.
b. Does the change in the current ratio from 2018 to 2019 indicate a favorable or an unfavorable change?
Answer:
a.
Current assets..................
Current liabilitites...............
Working capital..................
Current ratio.....................
2.25
($1,586,250 ÷ $705,000)
2.20
($1,210,000 ÷ $550,000)
b. The increase from 2.20 to 2.25 indicates a favorable change.