Selected condensed data taken from a recent balance sheet of Underwood Inc. are as follows. UNDERWOOD INC.

Question:

Selected condensed data taken from a recent balance sheet of Underwood Inc. are as follows.

UNDERWOOD INC.

Balance Sheet (partial)

Cash...........................................................$ 8,041,000

Short-term investments.......................................4,947,000

Accounts receivable...........................................6,545,000

Inventory......................................................20,814,000

Prepaid assets....................................................571,000

Total current assets.........................................$40,918,000

Total current liabilities.....................................$18,644,000

(a) Calculate the (1) current ratio and (2) acid-test ratio.

(b) What conclusions concerning Underwood's liquidity can be drawn?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...