Question

Liquidity Ratios XYZ's financial statements contain the following information: Cash $311,900 Accounts receivable 669,900 Inventory 823,900...

Liquidity Ratios XYZ's financial statements contain the following information: Cash $311,900 Accounts receivable 669,900 Inventory 823,900 Marketable securities 103,900 Accounts payable 593,000 Accrued expenses 177,000 Long-term debt 1,010,000 Round answers to two decimal places.

Required:

1. What is its current ratio?

2. What is its quick ratio?

3. What is its cash ratio?

4. Using the ratios computed above, answer the following regarding NWA's liquidity.

NWA’s current ratio depends on how liquid NWA's _______ are. If the ________ is slow moving, then the quick ratio may be a better indicator of liquidity. If accounts receivable may be difficult to collect, the __________ is best indicator of liquidity.

Business   Accounting   
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Answer #1
Cash 311900
Accounts receivable 669900
Inventory 823900
Marketbale securities 103900
Total current assets 1909600
Current liabilities
Accounts payable 593000
Accrued expense 177000
Total current liabilities 770000
1 Current ratio = Current assets / current Liabilities
Current ratio 2.48
(1909600/770000)
2 Quick ratio = (current assets - inventory)/ current liabilities
Current assets 1909600
less Inventory 823900
Quick assets 1085700
Quick ratio 1.41 (1085700/770000)
3 Cash ratio = Cash and cash equivalents / current liabilities
Cash 311900
Marketable securities 103900
Cash and cash equivalent 415800
Cash ratio 0.54 (415800/770000)
4 Current assets
inventory
quick ratio
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