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