Cash $130,000
Marketable securities 50,000
Accounts receivable (net) 60,000
Inventory 120,000
Accounts payable 150,000
Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place.
Answer:
a. Current Ratio = Current Assets ÷ Current Liabilities
Current Ratio = ($130,000 + $50,000 + $60,000 + $120,000) ÷ $150,000
Current Ratio = 2.4
b. Quick Ratio = Quick Assets ÷ Current Liabilities
Quick Ratio = ($130,000 + $50,000 + $60,000) ÷ $150,000
Quick Ratio = 1.6