Question

1. Using the information below, determine the current ratio for WTX Hospital:

Cash & equivalents: $375,000

Accounts receivable: $285,000

Net fixed assets: $1,220,000

Accounts payable: $195,000

Notes payable: $75,000

Capital lease obligations: $25,000

Net assets (equity): $1,450,000

A. 1.1

B. 2.4

C. 3.3

D. 2.2

E. 1.9

2. Using the information below, determine the Days Cash on Hand for WTX Hospital:
Cash and equivalents: $12,250
Short-term investments: $8,500
Net fixed assets: $278,000
Accounts receivable: $62,500
Wages & salaries: $125,000
Administrative costs: $25,000
Supplies: $10,750
Insurance: $7,250
Depreciation: $12,350
Notes payable: $18,750
Net Assets (equity): $62,500

A. 26.6

B. 28.2

C. 24.8

D. 38.0

E. 45.1

Answer 1

1.) Current Ratio = Current Assets / Current Liabilities

= (Cash and equivalents + Accounts Receivable ) / Accounts Payable

= (3,75,000 + 2,85,000) / 1,95,000

= 6,60,000 / 1,95,000

= 3.38

Option ( C) is the correct answer : 3.3

Note : Net Fixed Asset and Capital Lease Obligations or Net asset (Equity ) are neither part of Current Assets nor Current Liabilities

2. Days on Cash on Hand for the Hospital

=( cash and Cash Equivalents + Investments + Accounts Receivable + Net fixed Assets ) - (Notes Payable + Net Assets(Equity)

= 12250+8500+62500+278000 - 18750 - 62500

= 2,80,000

Option B is the correct Answer : 28.20