You have inherited money from your grandparents and a friend suggests that you consider buying shares in Galena Ski Products. Because you may need to sell the shares within the next two years to finance your university education, you start your analysis of the company data by calculating (1) working capital, (2) the current ratio, and (3) the quick ratio. Galena's statement of financial position is as follows:

Required:
a. What amount of working capital is currently maintained? Comment on the adequacy of this amount.
b. Your preference is to have a quick ratio of at least 0.80 and a current ratio of at least 2.00. How do the existing ratios compare with your criteria? Based on these two ratios, how would you evaluate the company's current asset position?
c. The company currently sells only on a cash basis and had sales of $900,000 this past year. How would you expect a change from cash to credit sales to affect the current and quick ratios?
d. Galena's statement of financial position is presented just before the start of shipments for its fall and winter season. How would your evaluation change if these balances existed in late February, following completion of its primary business for the skiing season?
e. How would Galena's situation as either a public company or private company affect your decision to invest?

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Current assets Cash $154,000 185,000 21,000 Inventory Other current assets Non-current assets Land 50,000 145,000 15,000 $570,000 Building and equipment Other Total Current liabilities Long-term debt Share capital Retained earnings Total $165,000 190,000 80,000 135.000 $570,000