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Current assets = $68,000, net working capital = -12,000, accounts receivable = $25,000, quick ratio =...

Current assets = $68,000, net working capital = -12,000, accounts receivable = $25,000, quick ratio = 0.60. 1) What is the current ratio? 2) What is the cash ratio? Please show all steps for solution.

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Answer #1

Current Assets = $68,000
Working Capital = -$12,000
Accounts Receivable = $25,000
Quick Ratio = 0.60

Working Capital = Current Assets - Current Liabilities
-$12,000 = $68,000 - Current Liabilities
Current Liabilities = $80,000

Current Ratio = Current Assets / Current Liabilities
Current Ratio = $68,000 / $80,000
Current Ratio = 0.85

Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities
0.60 = (Cash + $25,000) / $80,000
Cash + $25,000 = $48,000
Cash = $23,000

Cash Ratio = Cash / Current Liabilities
Cash Ratio = $23,000 / $80,000
Cash Ratio = 0.29

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