The following items are reported on a company's balance sheet: Cash $510,000 Marketable securities 398,500 Accounts receivable (net) 338,900 Inventory 346,500 Accounts payable 693,000 Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place. a. Current ratio b. Quick ratio

Current ratio= 2.3

Quick ratio= 1.8

Explanation:

Cash=$510,000

Marketable securities= $398,000

Account receivables= $338,900

Inventory= $346,000

Account payable = $693,000

Curent ratio= current assets/current liability

Current assets= cash+ marketable securities+ Account receivables+inventory

Current liability= Account payable

($510,000+$398,000+$338,900+$346,000)/$693,000

= $1,592,900/$693,000

= 2.29

Current ratio = 2.3 ( to 1 decimal place)

ii) Quick ratio= ( cash+ marketable securities+ Account receivable)/Current liability

=$510,000+$398,000+$338,900/$693,000

= $1,246,900/$693,000

= 1.79.

Quick ratio = 1.8 ( to 1 decimal place)

Current ratio 2.3

Quick ratio 1.8

Explanation:

Given Data:

Cash = $510,000

Marketable securities = $398,500

Account receivable ( net) = $338,900

Inventory = $346,500

Accounts payable = $693,000

( a.) The current ratio : this helps to determine the relationship between current assets and current liabilities

= current assets / current liabilities

Currents assets = ( cash + marketable securities + inventory + account receivable )

= $( 510,000 + 398,500 + 338,900 + 346,500)

= $1,593,900

Current liabilities = $693,000

Current ratio = $1,593,900 / $693,000

= 2.3

(b) Quick ratio is the ratio of quick asset against current liabilities.

Quick assets ( cash + marketable securities + accounts receivable)

= $( 510,000 + 398,500 + 338,900)

= $1,247,400

Quick ratio = $1,247,400 / $693,000

= 1.8

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