Answer:
1. 1.5 Times
2.$100,000
3.0.775 Times
4.$75,000
5.$100,000
Explanation:
Liquidity ratios can be found by just simply putting the given values in their appropriate formulas. All you have to memorize is the simple formulas
1.Current Ratio
CURRENT RATIO = CURRENT ASSETS/CURRENT LIABILITIES
CURRENT RATIO = $300,000/$200,000
CURRENT RATIO = 1.5 Times
2. Working Capital
WORKING CAPITAL= CURRENT ASSETS- CURRENT LIABILITIES
WORKING CAPITAL= $300,000 - $200,000
WORKING CAPITAL= $100,000
3. Acid ratio
ACID RATIO = CURRENT ASSETS - INVENTORY - PREPAID EXPENSES/CURRENT LIABILITIES
ACID RATIO = ($300,000 - $110,000 - $35,000)/$200,000
ACID RATIO = 0.775 Times
4. Receivable turnover
RECEIVABLE TURNOVER = CREDIT SALES/AVERAGE RECEIVABLE
RECEIVABLE TURNOVER = $750,000/$75,000
RECEIVABLE TURNOVER = 10 Times
<u>Working</u>
AVERAGE RECEIVABLE = (Opening receivables+Closing receivables)/2
AVERAGE RECEIVABLE = ($55,000 + $95,000) / 2 = $75,000
5. Inventory Turnover
INVENTORY TURNOVER = COST OF GOODS SOLD / AVERAGE INVENTORY
INVENTORY TURNOVER = $400,000 / $100,000
INVENTORY TURNOVER = 4 Times
<u>Working</u>
AVERAGE INVENTORY = (Opening inventories+Closing inventories)/2
AVERAGE INVENTORY = (110,000 + 90,000)/2
AVERAGE INVENTORY = $100,000
