Question

SDJ, Inc., has net working capital of $2,135, current liabilities of $5,320, and inventory of $2,470.SDJ, Inc., has net working capital of $2,135, current liabilities of $5,320, and inventory of $2,470.
a. What is the current ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What is the quick ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Answer:

1)

Net working capital = Current assets - current liabilities

2,135 = Current assets - 5,320

Current assets = 7,455

Current ratio = Current assets / current liabilities

Current ratio = 7,455 / 5,320

Current ratio = 1.40

2)

Quick ratio = (Current assets - inventory) / current liabilities

Quick ratio = (7,455 - 2,470) / 5,320

Quick ratio = 0.94

Answer 2

The current ratio of SDJ, Inc is  0.87.

The quick ratio of SDJ, Inc is  0.40.

What is the current ratio and the quick ratio?

Current ratio is an example of a liquidity ratio which measures the ability of a firm to meet its short terms obligations.

Current ratio = current asset /current liability

($2470 + $2,135) / $5,320 = 0.87

The quick ratio measure the ability of short term assets to meet current liabilities

The quick ratio = (current asset - inventory) / current liabilities

$2,135 / $5,320 = 0.40