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3 years ago

Dj, inc., has net working capital of $2,170, current liabilities of $4,590, and inventory of $3,860.

Business

2 answers:

lions [1.4K]3 years ago

7 0

a. The current ratio is 1.47.

b. The quick ratio is 0.63.

Further Explanation:

Current ratio:

Current ratio measures the firms’ ability to meet their short-term requirements. The current ratio is calculated by dividing the current assets by current liabilities.

Quick ratio:

Quick ratio which is also known as acid-test ratio, which is a type of liquidity ratio which measures the firms’ ability to use their quick assets to meet the expenses of current liabilities. The quick ratio is calculated by dividing the quick assets by current liabilities.

Step 1:

Compute the amount of current assets:

$\begin{aligned}\text{Net\:working\:capital}&=\text{Current\:assets\:-\:Current\:liabilities}\\\$2,170&=\text{Current\:assets\:-\:\$4,590}\\\text{Current\:assets}&=\$6,760\end{aligned}$

Step 2:

Compute current ratio:

$\begin{aligned}\text{Current\:ratio}&=\dfrac{\text{Current\:assets}}{\text{Current\:liabilities}}\\&=\dfrac{\$6,760}{\$4,590}\\&=1.47\end{aligned}$

Step 3:

Compute the amount of quick assets:

$\begin{aligned}\text{Quick\:assets}&=\text{Current\:assets\:-\:Inventory}\\&={\$6,760\:-\:\$3,860}\\&=\$2,900}\end{aligned}$

Step 4:

Compute quick ratio:

$\begin{aligned}\text{Quick\:ratio}&=\dfrac{\text{Quick\:assets}}{\text{Current\:liabilities}}\\&=\dfrac{\$2,900}{\$4,590}\\&=0.63\end{aligned}$

Thus, the current ratio is 1.47 and the quick ratio is 0.63.

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Answer Details:

Grade: High school

Chapter: Accounting ratios

Subject: Accounting

Keywords: Dj inc., has net working capital of $2,170, current liabilities of $4,590, and inventory of $3,860, what is the current ratio, do not round intermediate calculations and round your answer to 2 decimal places, 32.16, what is the quick ratio, do not round intermediate calculations and round your answer to 2 decimal places, 32.16, current ratio is 1.47,and quick ratio is 0.63.

jenyasd209 [6]3 years ago

6 0

The above answer can be explained as under -

Given,

Current Liabilities = $ 4,590

Net working capital = $ 2,170

So, the current assets will be calculated as under -

Net working capital = Current assets - Current liabilities

$ 2,170 = Current assets - $ 4,590

Current assets = $ 2,170 + $ 4,590

Current assets = $ 6,760

The liquid or quick assets will be calculated as -

Current assets - Inventory = Quick assets

Quick assets = $ 6,760 - $ 3,860

Quick assets = $ 2,900.

Now,

1. Current ratio = $\frac{Current assets }{Current Liabilities}$

Current ratio = $\frac{$ 6,760 }{$ 4,590}$ = 1.47

2. Quick ratio = $\frac{Quick assets }{Current Liabilities}$

Quick ratio = $\frac{$ 2,900 }{$ 4,590}$ = 0.63

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