Answer:
3.50 and 0.90
Explanation:
Calculation for the current ratio and acid-test ratio for the boutique
Calculation of CURRENT RATIO
First step is to calculate the current assets and current liabilities
CURRENT ASSETS
Cash 52,000
Short-term investment 12,000
Accounts receivable 54,000
Inventory 325,000
Prepaid expenses 17,500
Total current assets $ 460,500
CURRENT LIABILITIES
Accounts payable$ 106,500
Other current payables $ 25,000
Total current liabilities $ 131,500
Using this formula
Current ratio=Current assets/Current Liabilities
Let plug in the formula
Current ratio=460,500/131,500
Current ratio=3.50
Therefore the Current ratio will be 3.50
Calculation for CURRENT ACID -TEST RATIO
Using this formula
Current acid-test ratio=Quick assets/Current Liabilities
Let plug in the formula
Current acid-test ratio=460,500-(325,000+17,500)/131,500
Current acid-test ratio=118,000/131,500
Current acid-test ratio=0.90
Therefore the Current acid-test ratio will be 0.90
