RI4G Ad 83 813 AM Financial Ratios Quiz and Test l httpswwwa

RI4G Ad 83%. 8:13 AM Financial Ratios Quiz and Test l… https://www.accountingcoach.com Use the following information to answer items 5 - 7: At December 31 a company\'s records show the following information Cash Accounts Receivable Inventory Prepaid Insurance Long-term Assets Accounts Payable Notes Payable due in 10 months Wages Payable Long-term Liabilities Stockholders\' (Owner\'s) Equity $10,000 30,000 80,000 6,000 200,000 30,000 25,000 5,000 70,000 196,000 5. The company\'s working capital is 60,000 66,000 $196,000 6. The company\'s current ratio is 7. The company\'s quick ratio is

Solution

Solution:

Total current assets = Cash + Receivable + Inventory + Prepaid expenses = $(10000+30000+80000+6000) = $126000

Total current liabilities = Payables + outstanding expenses = $(30000+25000+5000) = $60000.

Total liquid asset = cash + receivable = $(10000+30000) = $40000.

5) Working capital = current asset - current Liabilities = 126000 - 60000 = $66000.

6) Current ratio = current assets/current liabilities. = 126000/60000 = 2.1:1.

7)Quick ratio = quick asset/ current liabilities = 40000/60000 = 0.66:1 or 0.7:1.