Analyis of Assets You have money to invest, and a friend suggested that you consider Galena Ski Products common stock. Because you may need to sell the stock within the next two years to pay for college expenses, you start your analysis of the company data by computing (1) working capital, (2) the current ratio, and (3) the quick ratio. Galena’s balance sheet is as follows:

a. What amount of working capital currently is maintained?
Would you recommend the company maintain that level?
Explain why.

b. Your preference is to have a quick ratio of at least .80 and a current ratio of at least 2.0. How do the existing ratios compare with your criteria? Using these two ratios, how would you evaluate the company’s current asset position?

c. The company sells only on a cash basis currently and had sales of $700,000 this past year. How would you expect a change from cash to credit sales to affect the balance sheet ratios?

d. Galena’s balance sheet 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?

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Current Assets Cash and cash equivalents $218,000 Inventory 320,000 Other current assets 32,000 Noncurrent Assets Buildings and equipment 300,000 Land 16,000 Other 25,000 Total $911,000 Current Liabilities $165,000 Long-Term Debt 400,000 Common Stock 150,000 Retained Earnings 196,000 Total $911,000