Question

Asked Feb 25, 2019

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given the following information, compute the current and quick ratios

cash $ 100,000

accounts receivable 357,000

inventory 458,000

current liabilities 498,000

long term debt 610,000

equity 598,000

Step 1

Current Ratio = Current Asset / Current Liabilities = CA / CL

Elements of current assets are:

cash, C = $ 100,000

accounts receivable, AR = 357,000

inventory, I = 458,000

Hence, total current assest, CA = sum of the three elements above = C + AR + I = 100,000 + 357,000 + 458,000 = $ 915,000

Step 2

Current liabilities, CL = 498,000

Hence, Current Ratio = CA / CL = 915,000 / 498,000 = 1.8373 (Please round it off as per your requirement)

Step 3

Quick assets, QA = C + AR = 100,000 + 357,000 = 457,000

Quick Ratio = QA / CL = ...

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