Answer:
1.
Current ratio = 1.37 times
2.
Quick Ratio = 1.15 times
Explanation:
The current ratio and quick ratios both are measures to assess the liquidity position of businesses. These are useful indicators of how well the business is equipped to meet its current obligations using its liquid assets.
To calculate these ratios, we must first determine the value of current assets. We are given the value of net working capital. The net working capital is the difference between the current assets and the current liabilities.
Net Working capital = Current assets - Current Liabilities
2060 = Current Assets - 5550
2060 + 5550 = Current Assets
Current assets = $7610
<u>Requirement 1.</u>
The current ratio is calculated as follows,
Current Ratio = Current Assets / Current Liabilities
Current ratio = 7610 / 5550
Current Ratio = 1.3711 rounded off to 1.37 times
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<u>Requirement 2.</u>
The quick ratio is calculated as follows,
Quick Ratio = (Current Assets - Inventories) / Current Liabilities
Quick Ratio = (7610 - 1250) / 5550
Quick Ratio = 1.1459 rounded off to 1.15 times
