# Current position analysis The following items are reported on a company’s balance sheet: Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place.

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 17, Problem 3PEA
Textbook Problem
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## Current position analysisThe following items are reported on a company’s balance sheet:Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place.

a)

To determine

Compute Current ratio.

### Explanation of Solution

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Current Ratio: Current ratio is used to determine the relationship between current assets and current liabilities. Current ratio is determined by dividing current assets and current liabilities.

Formula:

Current ratio=Current assetsCurrentliabilities

The ideal current ratio is 2:1

Compute current ratio.

Current ratio=Current assetsCurrent liabilities=$280,000$140,000=2

b)

To determine

Calculate Acid-test ratio.

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