Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 37

Calculate and analyze liquidity measures Following are the current asset and current liability sections of the balance sheets for Calketch, Inc., at August 31, 2011 and 2010 (in millions):

	August 31, 2011	August 31, 2010
Current Assets
Cash	$ 12	$ 24
Marketable securities	28	40
Accounts receivable	52	32
Inventories	72	32
Total current assets	$164	$128
Current Liabilities
Note payable	$ 12	$ 32
Accounts payable	40	56
Other accrued liabilities	36	28
Total current liabilities	$ 88	$ 116

Required:

a.Calculate the working capital and current ratio at each balance sheet date. Round your current ratio answers to two decimal places.

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b. Describe the change in the firm’s liquidity from 2010 to 2011.

Step 1 of 5

Calculate and analyze the liquidity measures of a company