Answer:
Current ratio is 2.50:1.
Quick ratio is 1.85:1
Explanation:
From the question, the following can first be calculated:
Current asset = Cash + Marketable securities + Account receivable + Inventory
= $225,000 + $115,000 + $112,000 + $158,000
Current asset = $610,000
Quick asset = Current asset – Inventory
= $610,000 - $158,000
Quick asset = $452,000
Current liability = Account payable = $244,000
(a) the current ratio
Current ratio = Current assets/current liability = $610,000/$244,000 = 2.50
Therefore, the current ratio is 2.50:1., and the company has more than enough current asset to meet its short term debt obligation.
(b) the quick ratio
Quick ratio = Quick assets/current liability = $452,000/$244,000 = 1.85
Therefore, the quick ratio is 1.85:1, and the company can quickly convert more than enough asset to cash to meet short and immediate debt obligations.
