Question

Calculating Liquidity Ratios SDJ, Inc., has net working capital of $1,050, current liabilities
of $4,300, and inventory of $1,300. What is the current ratio? What is the quick ratio?

Answer 1

Answer:

Current Ratio = 1.244

Quick Ratio = 0.942

Explanation:

NWC = 1050 = Current Assets – Current Liabilities = CA - 4300

=> CA = 1050+ 4300 = 5350

Current Ratio = Current Assets/Current Liabilities

= 5350/ 4300 = 1.244

Quick Ratio = (Current Assets – Inventory) / Current Liabilities

= (5350 – 1,300)/4300 = 0.942