The following data (in thousands) were taken from recent financial statements of Under Armour, Inc.:

The following data (in thousands) were taken from recent financial statements of Under Armour, Inc.:


December 31
Year 2 Year 1
Current assets $1,498,763 $1,549,399
Current liabilities 478,810 421,627




a. Compute the working capital and the current ratio as of December 31, Year 2 and Year 1. Round to two decimal places.

b.  What conclusions concerning the company’s ability to meet its financial obligations can you draw from part (a)?


Answers:

a.
Current assets...............
Current liabilitites............
Working capital...............
Current ratio..................
b. Under Armour’s working capital decreased by $107,819 ($1,019,953 – $1,127,772)
in Year 2. The current ratio decreased to 3.13 in Year 2. A current ratio of 3.13
still indicates a strong liquidity position. Thus, short-term creditors should not
be concerned about receiving payment from Under Armour.