Answer:
a. 2.50 times
b. 1.94 times
Explanation:
The current ratio is a financial ratio that shows how easily a company can settle current liabilities using current assets.
It is given as the ration of current assets to current liabilities.
Acid test ratio is similar to current asset except that inventory is not included in the current assets computation.
Given;
current assets: cash $12,000, credit card receivables $1,800, accounts receivable $180, food inventory $4,400, and prepaid expenses, $1,120
Total current assets = $12,000 + $1,800 + $180 + $4,400 + $1,120
= $19,500
Current liabilities = $7,800
Current ratio = $19,500/$7,800 = 2.50 times
Quick ratio = ($19,500 - $4,400)/$7,800 = 1.94 times
