Question

You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $420,000; accounts receivable = $1,160,000; inventory = $2,060,000; accrued wages and taxes = $480,000; accounts payable = $780,000; and notes payable = $560,000.

Calculate PattyCakes’ current ratio. (Round your answer to 2 decimal places.)

Current ratio times

Calculate PattyCakes’ quick ratio. (Round your answer to 2 decimal places.)

Quick ratio times

Calculate PattyCakes’ cash ratio. (Round your answer to 2 decimal places.)

Cash ratio times

Answer 1

Current Assets:
Cash and marketable securities	4,20,000
Accounts Receivable	11,60,000
Inventory	20,60,000
Total Current Assets	36,40,000
Current Liabilites:
Accrued wages and taxes	4,80,000
Accounts payable	7,80,000
Notes Payable	5,60,000
Total Current Liabilities	18,20,000
Current ratio = Current Assets / Current Liabilities
Current ratio = 3,640,000/1,820,000
Current ratio times = 2 times
Quick ratio = Quick Assets / Current Liabilities
Quick ratio = (3,640,000-2,060,000)/1,820,000
Quick ratio times = 0.87 times
Cash ratio = Cash and Cash equivalents / Current Liabilities
Cash ratio = 420,000/1,820,000
Cash ratio times = 0.23 times