Question

Nabors Company reported the following current assets and liabilities for December 31 for two recent years: Dec. 31, Current Year Dec. 31, Previous Year Cash $650 $680 Temporary investments 1,500 1,550 Accounts receivable 700 770 Inventory 1,250 1,400 Accounts payable 2,375 2,000 a. Compute the quick ratio on December 31 of both years. If required, round your answers to one decimal place g

Answer 1

Answer:

1.20 times and 1.50 times

Explanation:

The computation of the quick ratio is shown below:

Quick ratio = Quick assets ÷ Current liabilities

Particulars                        Current year               Last year

Quick Assets:  

Cash                           $650                         $680

Temporary Investments  $1,500                         $1,550

Accounts receivable   $700                         $770

Quick Assets                   $2,850                         $3,000

Current Liabilities  

Accounts Payable            $2,375                         $2,000

Current Liabilities            $2,375                          $2,000

So, Quick Ratio             1.20 times                  1.50 times

By dividing the quick assets with the current liabilities we can get the quick ratio