The bond indenture for the 10-year, 9% debenture bonds issued January 2, 2013, required working capital of $100,000, a current ratio of 1.5, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 2014, the three measures were computed as follows:

$$\begin{array}{lrr} \text{1. Current assets:}\\ \quad\text{Cash}& \$102,000\\ \quad\text{Temporary investments}& 48,000\\ \quad\text{Accounts and notes receivable (net)}& 120,000\\ \quad\text{Inventories}& 36,000\\ \quad\text{Prepaid expenses}& 24,000\\ \quad\text{Intangible assets}& 124,800\\ \quad\text{Property, plant, and equipment}& 55,200\\ \quad\quad\text{Total current assets (net)}&& \$510,000\\ \text{Current liabilities:}\\ \quad\text{Accounts and short-term notes payable}& \$ 96,000\\ \quad\text{Accrued liabilities}& 204,000\\ \quad\quad\text{Total current liabilities}& &300,000\\ \quad\text{Working capital}&& \$210,000\\ \text{2. Current ratio}& 1.7& \$510,000 \div \$300,000\\ \text{3. Quick ratio}& 1.2 &\$115,200 \div \$ 96,000\\ \end{array}$$

b. Is the company satisfying the terms of the bond indenture?

A company reports the following:

$$\begin{array}{lr} \text { Net sales } & \$ 1,800,000 \\ \text { Average total assets } & 1,125,000 \end{array}$$

Determine the ratio of net sales to assets.

The bond indenture for the 10-year, 9% debenture bonds issued January 2, 2013, required working capital of $100,000, a current ratio of 1.5, and a quick ratio of 1.0 at the end of each calendar year until the bonds mature. At December 31, 2014, the three measures were computed as follows:

$$\begin{array}{lrr} \text{1. Current assets:}\\ \quad\text{Cash}& \$102,000\\ \quad\text{Temporary investments}& 48,000\\ \quad\text{Accounts and notes receivable (net)}& 120,000\\ \quad\text{Inventories}& 36,000\\ \quad\text{Prepaid expenses}& 24,000\\ \quad\text{Intangible assets}& 124,800\\ \quad\text{Property, plant, and equipment}& 55,200\\ \quad\quad\text{Total current assets (net)}&& \$510,000\\ \text{Current liabilities:}\\ \quad\text{Accounts and short-term notes payable}& \$ 96,000\\ \quad\text{Accrued liabilities}& 204,000\\ \quad\quad\text{Total current liabilities}& &300,000\\ \quad\text{Working capital}&& \$210,000\\ \text{2. Current ratio}& 1.7& \$510,000 \div \$300,000\\ \text{3. Quick ratio}& 1.2 &\$115,200 \div \$ 96,000\\ \end{array}$$

a. List the errors in the determination of the three measures of current position analysis.