Question

Case X			Case Y			Case Z
Cash		$	2,550		$	260		$	1,300
Short-term investments			0			0			700
Current receivables			290			540			650
Inventory			2,250			2,080			3,200
Prepaid expenses			400			700			900
Total current assets		$	5,490		$	3,580		$	6,750
Current liabilities		$	2,280		$	1,350		$	3,700

  

Compute the current ratio and acid-test ratio for each of the following separate cases.

	Current Ratio
	Choose Numerator:		Choose Denominator:	=	Current Ratio
		/		=	Current ratio
Case X		/		=	0	to 1
Case Y		/		=	0	to 1
Case Z		/		=	0	to 1
	Acid-Test Ratio
	Choose Numerator:		Choose Denominator:	=	Acid-Test Ratio
		/		=	Acid-test ratio
Case X		/		=	0	to 1
Case Y		/		=	0	to 1
Case Z		/		=	0	to 1

Answer 1

Ans- Current Ratio:-

	Choose Numerator:	/	Choose Denominator:	=	Current Ratio
	Current Assets	/	Current Liabilities	=	Current Ratio
Case X	$5,490	/	$2,280	=	2.41	to 1
Case Y	$3,580	/	$1,350	=	2.65	to 1
Case Z	$6,750	/	$3,700	=	1.82	to 1

Acid-Test Ratio:-

	Choose Numerator:	/	Choose Denominator:	=	Acid-Test Ratio
	Quick Assets	/	Current Liabilities	=	Acid-Test Ratio
Case X	$2,840	/	$2,280	=	1.25	to 1
Case Y	$800	/	$1,350	=	0.59	to 1
Case Z	$2,650	/	$3,700	=	0.72	to 1

Computation of Quick Assets:-

	Case X	Case Y	Case Z
Cash	$2,550	$260	$1,300
Short -term Investments	0	0	$700
Current Receivables	$290	$540	$650
Total Quick Assets	$2,840	$800	$2,650

Case X is in the best position to met short term obligations because its acid test ratio is greater than 1.

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