Question

The following items are reported on a company's balance sheet: Cash $100,000 Marketable securities 50,000 Accounts receivable (net) 60,000 Inventory 70,000 Accounts payable 140,000 Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place. a. Current ratio fill in the blank 1 b. Quick ratio fill in the blank 2

Answer 1

Answer:

a. 2.00

b. 1.50

Explanation:

The Current and Quick ratios are both liquidity ratios that are used to determine the ability of a company to pay off its current liabilities with current assets.

a. Current Ratio

= Current assets / Current liabilities

= (100,000 + 50,000 + 60,000 + 70,000) / 140,000

= 2.00

b. Quick ratio

= (Current assets - Inventory) / Current liabilities

= (100,000 + 50,000 + 60,000) / 140,000

= 1.50