Question

Last year, Capriana Corporation (CC) had sales of $200 million, and its inventory turnover ratio was 5.0. The CC’s current assets totaled $100 million, and its current ratio was 1.2. What was CC’s quick ratio?

Answer 1

Answer:

quick ratio  = 0.72

Explanation:

given data

sales = $200 million

inventory turnover ratio = 5.0

current assets totaled = $100 million

current ratio = 1.2

solution

we get here quick ratio so here

inventory turnover ratio = $\frac{sales}{inventory}$   ...............1

put here value

inventory = $\frac{200}{5}$

inventory = 40

and

now we get current liability

current ratio = $\frac{current\ assets}{current\ liability}$   ...............2

put here value

current liability = $\frac{100}{1.20}$

current liability = 83.33

and here quick ratio

quick ratio = $\frac{current\ assets - inventory}{current\ liability}$   .............3

quick ratio  = $\frac{100-40}{83.33}$  

quick ratio  = 0.72