Question

Adieu Company reported the following current assets and current liabilities for two recent years: Dec. 31,...

Adieu Company reported the following current assets and current liabilities for two recent years:

Dec. 31, 20Y4 Dec. 31, 20Y3
Cash $830 $630
Temporary investments 1,200 1,500
Accounts receivable 820 950
Inventory 2,300 2,600
Accounts payable 1,900 2,200

a. Compute the quick ratio on December 31 for each year. Round to one decimal place.

20Y4 20Y3
Quick Ratio

b. Is the quick ratio improving or declining?

Business   Accounting   
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Answer #1

a.

20Y4 20Y3
Cash $830 $630
Temporary investments 1,200 1,500
Accounts receivable 820 950
Accounts payable 1,900 2,200

For 20Y4

Quick ratio = (Cash+Temporary investments+ Accounts receivable)/ Accounts payable

= (830+1,200+820)/1,900

= 1.5

For 20Y3

Quick ratio = (Cash+Temporary investments+ Accounts receivable)/ Accounts payable

= (630+1,500+950)/2,200

= 1.4

b.

The quick ratio is improving.

Please give a positive rating if you are satisfied with this solution and if you have any query kindly ask.

Thanks!!!

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