Answer:
a.
Quick Ratio - Current Year = 1.44
Quick Ratio - Previous Year = 1.447826 rounded off to 1.45
b.
The quick ratio of the business has declined as it has less current assets to pay of each $1 of current liability than it had previous year.
Explanation:
A.
The quick ratio or acid test ratio is a financial ratio that is used to assess the liquidity of a business. It measures the amount of most liquid assets that the business has to pay each $1 of current liability of the business. The most liquid assets of a business are all of its current assets excluding inventory. The formula to calculate the quick ratio is,
Quick ratio = (Current Assets - Inventory) / Current Liabilities
Quick Ratio - Current Year = (660 + 1440 + 3300 - 1080) / 3000
Quick Ratio - Current Year = 1.44
Quick Ratio - Previous Year = (920 + 2050 + 1400 - 1040) / 2300
Quick Ratio - Previous Year = 1.447826 rounded off to 1.45
B.
The quick ratio of the business in previous year was approx. 1.45 which means that the business had $1.45 of most liquid current assets to pay each $1 of current liability while this year, it has $1.44 of current assets for each $1 of current liability. This means that the quick ratio of the business has declined as it has less current assets to pay of each $1 of current liability than it had previous year.
