Analyze and evaluate liquidity and debt-paying ability
Response to the following problem:
Baltimore Corporation reported the following current accounts at December 31, 2014 (amounts in thousands):
Cash $1,500
Receivables.. 5,900
Inventory 2,700
Prepaid expenses 1,000
Accounts payable 2,600
Unearned revenue 1,600
Accrued expenses payable 1,900
During January 2015, Baltimore completed these selected transactions:
¦ Sold services on account, $9,000
¦ Depreciation expense, $400
¦ Paid for expenses, $7,300
¦ Collected from customers on account, $8,100
¦ Accrued expenses, $500
¦ Paid on account, $1,400
¦ Used up prepaid expenses, $700
Compute Baltimore's net working capital and current ratio at December 31, 2014, and again at January 31, 2015. Did the net working capital and current ratio improve or deteriorate during January 2015? Comment on the level of the company's net working capital and current ratio.