Question

Below you see selected information from the financial statement of Dicson Inc., a retail furniture store....

Below you see selected information from the financial statement of Dicson Inc., a retail furniture store.

From the Balance Sheet

Amount $

Cash

$30,000

Accounts Receivable

$150,000

Inventory

$150,000

Factory

$500,000

Current Liabilities

$150,000

Total Stochholders´Equity

$300,000

Total Assets

$1,000,000

INSTRUCTION:(SHOW YOUR CALCULATIONS AND ROUND TO 2 DECIMAL PLACES)

Compute the following Ratio.

  1. CurrentRatio

  1. WorkingCapital

  1. QuickRatio

Commend your result for the Quick Ratio of Dicson Inc.

Business   Accounting   
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Homework Answers

Answer #1

a. Current Ratio = Current assets / Current liabilities

= (30000 + 150000 + 150000) / 150000

= 330000 / 150000

= 2.2

b. Working Capital = Current Assets - Current liabilities

= (30000 + 150000 + 150000) - 150000

= 1,80,000

c. Quick Ratio = Current Assets excluding inventory / Current Liabilities

= (30000 + 150000) / 150000

= 1.2

When the quick ratio is greater than 1, implies that the company has enough assets to pay off its liabilities. Here in this example, Dicson Inc.'s quick ratio is 1.2, that means the company isdoing good and have sufficient current assets to pay off current liabilities.

Please comment in case of any doubts.

Kindly rate the answer. Thank you. :-)

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