Question

Aya Ueto incurs living expenses for $4,500 per month. She has $3,000 cash in the bank,...

Aya Ueto incurs living expenses for $4,500 per month. She has $3,000 cash in the bank, two expensive
cars worth about $165,000, and a house worth $1 million. However, she also carries a $15,000 credit
card liability and has a $60,000 bank loan due within six months. Compute her liquidity ratio and
current ratio. (Show your calculations)

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Answer #1

Ans.1. living expenses = $4500 per month (liabilities).

Cash at bank = $3000 ( Current Assets)

two expensive cars worth = $1,65,000. (Fixed Assets)

House worth = $10,00,000. ( fixed assets)

Credit card liability = $15,000. ( current liabilities)

Bank loan = $60,000.( current liabilities).

Current Ratio = Current Assets / Current liabilities.

Current Ratio = $3000 / $ 75,000 = 0.04 :1

Quick Ratio = Quick Assets / Current liabilities.( living expenses are prepaid expenses )

Quick Ratio = $4500 / $75,000 = 0.06 :1

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