Question

In: Finance

5. A) If You had $10,000 in liquid assets and $5,000 in current liabilities, you would...

5. A) If You had $10,000 in liquid assets and $5,000 in current liabilities, you would have a liquidity ratio of?

b) What does it mean?

Expert Solution

5. a)

Liquidity ratio

=

Liquid assets / Current Liability

=

$ 10,000.00

/

$ 5,000.00

=

2.00

5. b)

Liquidity ratio represent liquidity of company with respect to its current liability.

Liquid assets are those assets which are readily convertible into cash.

Any entity has many current assets.But, all current assets like Inventory and Prepaid Expenses are not readily

convertible into cash like Cash balance at bank, short term marketable securities etc.

So, in summary, it is the capability of company to have liquid assets which can be easily converted into cash and be used for the payment of its current liability.

jeff jeffy answered 1 year ago

A company had the following assets and liabilities at the beginning and end of the current...

A company had the following assets and liabilities at the beginning and end of the current year: Assets Liabilities Beginning of year $ 230,000 $ 96,000 End of the year 261,000 78,200 Common stock in the amount of $ 23,000 was issued and dividends of $ 6,600 were paid during the year. What is the amount of net income for the year?

Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year. This...

Andre's Dog House had current assets of $67,200 and current liabilities of $71,100 last year. This year, the current assets are $82,600 and the current liabilities are $85,100. The depreciation expense for the past year is $9,600 and the interest paid is $8,700. What is the amount of the change in net working capital (NWC)?

ABC Inc had current assets of $67,200 and current liabilities of $71,100 last year. This year,...

ABC Inc had current assets of $67,200 and current liabilities of $71,100 last year. This year, the current assets are $83,100 and the current liabilities are $85,100. The depreciation expense for the past year is $9,600 and the interest paid is $8,700. What is the amount of the change in net working capital? $1,900 $2,800 $1,400 $2,100 −$1,400

If you had $100,000 of liquid assets, in what type(s) of accounts would you deposit/invest your...

If you had $100,000 of liquid assets, in what type(s) of accounts would you deposit/invest your money? Explain your decisions. (Please respond with regards to risk and return considerations.)

Quick Ratio (QR) = Liquid Assets/Current Liabilities. Why is it more important to manage quick ratio,...

Quick Ratio (QR) = Liquid Assets/Current Liabilities. Why is it more important to manage quick ratio, in a time of recession, for the survival of a company?

Info 1. Current YTM = 8.5% 2. Liabilities at the end of 5 years = 10,000(1.085)^5...

Info 1. Current YTM = 8.5% 2. Liabilities at the end of 5 years = 10,000(1.085)^5 = 15,036.56 3. Buy the bond that has a coupon of 8%, YTM 8.5%, N = 5 Calculate - 1. Duration 2. Can you match duration of your liabilities? 3. Calculate what happens if your YTM rises by 1% ***please only answer question 2 [Can you match duration of your liabilities?]. i will post 3 after i get the answer for 2. i included...

Bryan called and said that he had compiled a list of assets and liabilities and would...

Bryan called and said that he had compiled a list of assets and liabilities and would send them over to you. The list came a few days later. His assets included a home worth $427,770, approximately $389,697 in securities, two cars worth $65,500 with loans of $48,950 against them, and other assets including jewelry (worth $7,750), art ($13,500), and furniture ($9,095). Bryan and his wife, Crystal, have a money market fund with $2,550, a joint savings account of $4,573, student...

If current assets is $200,000, and current liabilities is $50,000 . what will be the current...

If current assets is $200,000, and current liabilities is $50,000 . what will be the current ratio.?

Exercise 193 Booker Corporation had the following comparative current assets and current liabilities: Dec. 31, 2017...

Exercise 193 Booker Corporation had the following comparative current assets and current liabilities: Dec. 31, 2017 Dec. 31, 2016 Current assets Cash $60,000 $30,000 Short-term investments 40,000 10,000 Accounts receivable 55,000 95,000 Inventory 110,000 90,000 Prepaid expenses 35,000 20,000 Total current assets $300,000 $245,000 Current liabilities Accounts payable $140,000 $110,000 Salaries payable 40,000 30,000 Income tax payable 20,000 15,000 Total current liabilities $200,000 $155,000 During 2017, credit sales and cost of goods sold were $750,000 and $400,000, respectively. Compute the...

Can you explain the charts of adjustments for changes in current assets and current liabilities? How...

Can you explain the charts of adjustments for changes in current assets and current liabilities? How can we apply to the problem?