After Reporting a Profit of $20,000 for the Year,a Certain

question 143

Essay

After reporting a profit of $20,000 for the year,a certain company reported the following items on its balance sheet at December 31,Year 1:
$$\begin{array} { l r } \text { Cash } & \$ 225,000 \\\text { Acculnts receivable } & 110,000 \\\text { Inventory } & 80,000 \\\text { Prepaid insurance } & 5,000 \\\text { Land } & 100,000 \\\text { Building } & 280,000 \\\text { Accounts payable } & 60,000 \\\text { Salaries payable } & 10,000 \\\text { Common shares } & 500,000 \\\text { Retained earnings } & 230,000\end{array}$$
A) Calculate the current ratio and determine the amount of working capital.

B) Beyond the information provided in your answers to part A, what does the composition of the current assets tell you about the company's liquidity?

C) What other information would one need to fully access liquidity?

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Definitions:

Formal Retreat Approach

A strategic decision-making process where decision makers step back from the immediate problem in order to reconsider their options from a new perspective.

Firm's Headquarters

The primary office or location where the central functions of an organization are coordinated and managed, often the base for executive decision-makers.

Continuous Improvement Approach

A long-term approach to work that systematically seeks to achieve incremental changes in order to improve efficiency and quality.

Team Effectiveness

A measure of a team's ability to achieve its goals and objectives, often influenced by factors like communication, leadership, and member roles.