Question

Based on the following data, what is the quick ratio, rounded to one decimal point? Accounts payable $30,000 Accounts receivable 60,000 Accrued liabilities 5,000 Cash 40,000 Intangible assets 50,000 Inventory 69,000 Long-term investments 80,000 Long-term liabilities 100,000 Marketable securities 30,000 Fixed assets 670,000 Prepaid expenses 1,000
a. 4.3
b. 2.9
c. 3.7
d. 5.1

Answer 1

Answer:

Option (C) is correct.

Explanation:

Quick assets:

= Accounts receivable + Cash + Temporary investments

= 60,000 + 40,000 + 30,000

= $130,000

Current liabilities = Accounts payable + Accrued liabilities

                             = 30,000 + 5,000

                            = $35,000

Hence, the quick ratio:

= Quick assets ÷ Current liabilities

= 130,000 ÷ 35,000

= 3.7(Approx).