The following balance sheet data for Brimstone Company are shown below.

The following balance sheet data for Brimstone Company are shown below.


2014 2013
Current assets $1,586,250 $1,210,000
Current liabilities 705,000 550,000




a. Determine the working capital and current ratio for 2014 and 2013.
b. Does the change in the current ratio from 2013 to 2014 indicate a favorable or an unfavorable trend?


Answer:

a.
Current assets………………
Current liabilities……………
Working capital………………
Current ratio…………………
2014
$1,586,250
705,000
$ 881,250
2.25
($1,586,250 ÷ $705,000)
2013
$1,210,000
550,000
$ 660,000
2.20
($1,210,000 ÷ $550,000)
b. The change from 2.20 to 2.25 indicates a favorable trend.