Sedgewick Boutique reported the following financial data for 2014 and 2013.

SEDGEWICK BOUTIQUE Balance Sheet (partial)

September 30 (in thousands)

2014 2013 Current assets Cash and short-term deposits $2,574 $1,021 Accounts receivable 2,147 1,575 Inventories 1,201 1,010 Other current assets 322 192 Total current assets $6,244 $3,798 Current liabilities $4,503 $2,619 Instructions

(a) Calculate the current ratio for Sedgewick Boutique for 2014 and 2013.

(b) Suppose that at the end of 2014, Sedgewick Boutique used $1.5 million cash to pay off

$1.5 million of accounts payable. How would its current ratio change?

(c) At September 30, Sedgewick Boutique has an undrawn operating line of credit of

$12.5 million. Would this affect any assessment that you might make of Sedgewick Boutique’s short-term liquidity? Explain.

AppendixLO2