Answered: the total current assets of Gorgan…

Name: the total current assets of Gorgan company is equal to $540,000. This
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Description: the total current assets of Gorgan company is equal to $540,000. This includes cash of $40,000, inventories of $250,000, and accounts receivables of $250,000. the current liabilities of the company is equal to $400,000. Calculate the companies quick

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter3: Evaluation Of Financial Performance

Section: Chapter Questions

Problem 19P

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the total current assets of Gorgan company is equal to $540,000. This includes cash of $40,000, inventories of $250,000, and accounts receivables of $250,000. the current liabilities of the company is equal to $400,000. Calculate the companies quick ratio (round to 2 decimal places).

A) 1.35

B) 1.25

C) 0.63

D) 0.73

Expert Solution

Step 1

Hence, the correct option is (D). The quick ratio is 0.73. It is obtained by dividing current assets minus inventory by current liabilities.

Current Assets – Inventory
Quick Ratio
Current Liabilities
$540,000 – $250,000
$400,000
$290,000
$400,000
= 0.725

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