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4 years ago

Computing and analyzing acid-test and current ratios LO A1

Business

1 answer:

sweet [91]4 years ago

7 0

Answer:

Current ratio

Case X 2.60

Case Y 3.50

Case Z 1.95

Acid -test ratio

Case X 1.20

Case Y 0.58

Case Z 0.60

Explanation:

Computation of the current ratio and acid-test ratio

CURRENT RATIO

Particulars Choose Numerator / Choose denominator = Current Ratio

Formula Current Assets / Current Liabilities = Current Ratio

Case X $5,200.00 / $2,000.00 = 2.60 to 1

Case Y $3,500.00 / $1,000.00 = 3.50 to 1

Case Z $7,410.00 / $3,800.00 = 1.95 to 1

ACID - TEST RATIO

Particulars Choose Numerator / Choose denominator = Acid Test Ratio

Formula Quick Assets / Current Liabilities = Acid Test Ratio

Case X $2,400.00 / $2,000.00 = 1.20 to 1

Case Y $580.00 / $1,000.00 = 0.58 to 1

Case Z $2,280.00 / $3,800.00 = 0.60 to 1

Note:

Quick Asset

Case X

Cash $ 2,000

Short-term investments 50

Current receivables 350

=$2,400

Case Y

Cash $ 110 $

Short-term investments 0

Current receivables 470

=$580

Case Z

Cash $ 1,000

Short-term investments 580

Current receivables 700

=$2,280

Therefore:

Current ratio will be:

Case X 2.60

Case Y 3.50

Case Z 1.95

Acid -test ratio will be:

Case X 1.20

Case Y 0.58

Case Z 0.60

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