AP$6-14$A $($Current and quick ratios$)$ The following amounts were reported by Liquid Company in its most recent statement of financial position:

Cash

$ $40,000$

Accounts receivable $($net$)$

$130,000$

Short$-$term investments

$18,000$

Inventory

$390,000$

Prepaid insurance

$35,000$

Property, plant, and equipment $($net$)$

$960,000$

Accounts payable

$85,000$

Wages payable

$37,000$

Income tax payable

$45,000$

Sales tax payable

$10,000$

Notes payable $($due within one year$)$

$90,000$

Bank loan payable $($due in three years$)$

$50,000$

Required

Calculate the current ratio and quick ratio for Liquid Company.

Based on a review of other companies in its industry, the management of Liquid Company thinks it should maintain a current ratio of $2\mathrm{.}2$ or more and a quick ratio of $0\mathrm{.}9$ or more. Its current and quick ratios at the end of the prior year were $2\mathrm{.}1$ and $0\mathrm{.}8,$ respectively. How successful has the company been in achieving the desired results this year?

How could the company improve its current position? What risks, if any, may be associated with the strategy you have suggested?