assets
Nabors Company reported the following current assets and liabilities for December 31 for two recent years:
| Dec. 31, Current Year | Dec. 31, Previous Year | |||
| Cash | $1,140 | $1,290 | ||
| Temporary investments | 2,500 | 2,890 | ||
| Accounts receivable | 3,640 | 1,970 | ||
| Inventory | 1,870 | 1,850 | ||
| Accounts payable | 5,200 | 4,100 |
Required:
a. Compute the quick ratio on December 31 of both years. If required, round your answers to one decimal place.
| Quick Ratio | |
| December 31, current year | |
| December 31, previous year |
b. Is the quick ratio improving or declining?
Sollution:-A) Calculation of Quick ratio ( Current year)
i) Quick ratio:-
= (Current assets-Inventory) /Current liabilities
= (cash +inventory + temporary investments +accounts receivables- inventory) /
Accounts receivables
= ($1,140+ $1,870+$2,500+$3,640-$1,870) / ($5,200)
=1.40
Sollution:- A)Calculation of Quick ratio( Previous year)
ii) Quick ratio:-
= (Current assets-Inventory) /Current liabilities
= (cash +inventory + temporary investments +accounts receivables- inventory) /
Accounts receivables
= ($1,290+ $1,850+$2,890+$1,970-$1,850) / ($4,100)
=1.50
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