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Problem 4.14 (Solution Video) Sandhill Electronics has a quick ratio of 1.45, current liabilities of $5,330,000,...

Problem 4.14 (Solution Video)

Sandhill Electronics has a quick ratio of 1.45, current liabilities of $5,330,000, and inventories of $6,727,900. What is the firm’s current ratio? (Round answer to 2 decimal places, e.g. 12.25.)

Current ratio
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Answer #1

Calculation of Current Ratio of Sandhill Electronics


Step 1: Calculate Quick Assets using Quick Ratio formula

Quick Ratio = 1.45

Quick Assets / Current Liabilities = 1.45

Quick Assets = 1.45 * Current Liabilities

Quick Assets = 1.45 * 5,330,000

Quick Assets = 7,728,500

Step 2: Calculate the Current Assets.

Current Assets = Quick Assets + Inventories

Current Assets = 7,728,500 + 6,727,900

Current Assets = 14,456,400

Step 3: Calculate Current Ratio.

Current Ratio = Current Assets / Current Liabilities

Current Ratio = 14,456,400 / 5,330,000

Current Ratio = 2.712

Current Ratio is 2.71 (rounded off to 2 decimal places).

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