Question

The following items are reported on a company's balance sheet: Cash $258,000 Marketable securities 114,000 Accounts receivable 187,000 Inventory 204,000 Notes payable (short-term) 249,000 Determine the (a) current ratio and (b) quick ratio. Round your answers to one decimal place. a. Current ratio fill in the blank 1 b. Quick ratio fill in the blank 2

Answer 1

Answer and Explanation:

The computation is shown below:

a. Current ratio

= Current assets ÷ Current liabilities

= ($258,000 + $114,000 + $187,000 + $204,000) ÷ ($249,000)

= 31 : 1 times

b. And, the quick ratio  is

= Quick assets ÷ Current liabilities

= ($258,000 + $114,000 + $187,000)  ÷ ($249,000)

= 22 : 1 times

We simply applied the above formulas and the same is to be considered