PE 17-3B Current position analysis

The following items are reported on a company’s balance sheet:

Cash $210,000
Marketable securities 120,000
Accounts receivable (net) 110,000
Inventory 160,000
Accounts payable 200,000

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  =  ($210,000 + $120,000 + $110,000 + $160,000) ÷ $200,000 
Current Ratio  =  3.0 
b. Quick Ratio  =  Quick Assets ÷ Current Liabilities 
Quick Ratio  =  ($210,000 + $120,000 + $110,000) ÷ $200,000 
Quick Ratio  =  2.2