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Andrej [43]
3 years ago
5

You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: cash and

marketable securities = $200,000, accounts receivable = $800,000, inventory = $1,000,000, accrued wages and taxes = $250,000, accounts payable = $400,000, and notes payable = $300,000. What are Blue Jays' current ratio, quick ratio, and cash ratio, respectively?
Business
1 answer:
bezimeni [28]3 years ago
7 0

Answer:

a. Current ratio=2.105

b. Quick ratio=1.053

c. Cash ratio=0.211

Explanation:

a.

<em>Step 1: Determine total current assets</em>

The total current assets can be expressed as;

T=C+R+I

where;

T=total current assets

C=cash and marketable securities

R=accounts receivable

I=inventory

In our case;

T=unknown, to be determined

C=$200,000

R=$800,000

I=$1,000,000

replacing;

T=(200,000+800,000+1,000,000)=$2,000,000

Total current assets=$2,000,000

<em>Step 2: Determine total current liabilities</em>

The total current liabilities can be expressed as;

T=W+A+N

where;

T=total current liabilities

W=accrued wages and taxes

A=accounts payable

N=notes payable

In our case;

T=unknown, to be determined

W=$250,000

A=$400,000

N=$300,000

replacing;

T=(250,000+400,000+300,000)=$950,000

Total current liabilities=$950,000

<em>Step 3: Determine current ratio</em>

The current ratio can be expressed as follows;

Current ratio=total current assets/total current liabilities

where;

Current ratio=unknown, to be determined

total current assets=$2,000,000

total current liabilities=$950,000

replacing;

Current ratio=(2,000,000/950,000)=2.105

b.

<em>Step 4: Determine quick ratio</em>

The quick ratio can be expressed as follows;

Quick ratio=(current assets-inventory)/current liabilities

where;

Quick ratio=unknown, to be determined

current assets=$2,000,000

inventory=$1,000,000

current liabilities=$950,000

replacing;

Quick ratio=(2,000,000-1,000,000)/950,000

Quick ratio=1,000,000/950,000=1.053

Quick ratio=1.053

c.

<em>Step 4: Determine cash ratio</em>

The cash ratio can be expressed as follows;

Cash ratio=(cash+marketable securities)/current liabilities

where;

Cash ratio=unknown, to be determined

Cash and marketable securities=$200,000

current liabilities=$950,000

replacing;

Cash ratio=(200,000/950,000)=0.211

Cash ratio=0.211

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Nov 7      Accounts payable                  $300

       Merchandise Inventory                                          $300

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