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Current Position Analysis The following items are reported on a company's balance sheet: Cash $201,800 Marketable...

Current Position Analysis

The following items are reported on a company's balance sheet:

Cash $201,800
Marketable securities 157,700
Accounts receivable (net) 85,700
Inventory 185,500
Accounts payable 371,000

Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place.

a. Current ratio
b. Quick ratio
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Answer #1

Solution

a. Current ratio 1.7
b. Quick ratio 1.5

Working

Working
a. Current ratio 1.7 Current assets / Current liabilities
b. Quick ratio                     1.5 (Current assets-Inventory) / Current liabilities

.

Cash $    201,800.00
Marketable securities $    157,700.00
Accounts receivable (net) $     85,700.00
Inventory $    185,500.00
Total Current assets $      630,700.00

In quick ratio quick assets are used instead of current assets. Quick assets = Current assets - Inventory and prepaid expense

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