In: Accounting
Current Ratio and Quick (Acid-Test) Ratio Upton Company has current assets equal to $2,885,000. Of these, $1,100,000 is cash, $1,105,000 is accounts receivable, and the remainder is inventories. Current liabilities total $2,850,000. Required: Note: Round answers to two decimal places.
1. Compute the current ratio.
2. Compute the quick (acid-test) ratio.
Feedback 1. Current Ratio = Current Assets/Current Liabilities 2. Quick Ratio = (Cash + Marketable Securities + Accounts Receivable)/Current Liabilities
Solution
1. Current ratio | 1.0 |
2. Quick ratio | 0.8 |
..
Working | ||
a. Current ratio | 1.0 | Current assets / Current liabilities.... (2885000/2850000) |
b. Quick ratio | 0.8 | (Current assets-Inventory) / Current liabilities ((2885000-680000)/285000 |
.
Cash | $ 1,100,000.00 |
Marketable securities | $ 1,105,000.00 |
Inventory | $ 680,000.00 |
Total current assets | $ 2,885,000.00 |