Question

The Golden Braid Bookstore currently has $340,000 in cash, $280,000 in inventory, and $40,000 in accounts receivable. The company also has $65,000 in accounts payable, and $15,000 in other current liabilities. What is its quick ratio?

Answer 1

The quick ratio is a measure of a company's liquidity. It calculates a company's ability to pay off its current liabilities with its most liquid assets. The Golden Braid Bookstore has a quick ratio of 4.75.

Step-by-step explanation:

The quick ratio, also known as the acid-test ratio, is a measure of a company's liquidity. It calculates a company's ability to pay off its current liabilities with its most liquid assets. The formula for the quick ratio is:

Quick Ratio = (Cash + Accounts Receivable) / Current Liabilities

In this case, the Golden Braid Bookstore has $340,000 in cash and $40,000 in accounts receivable. Its current liabilities include $65,000 in accounts payable and $15,000 in other current liabilities. Plugging these values into the formula:

Quick Ratio = (340,000 + 40,000) / (65,000 + 15,000)

Quick Ratio = 380,000 / 80,000

Quick Ratio = 4.75

Therefore, the Golden Braid Bookstore has a quick ratio of 4.75.

Answer 2

The quick ratio is 4.75:1.

Step-by-step explanation:

From the given information it is clear that:

Cash = $340,000

Inventory = $280,000

Accounts receivable = $40,000

Accounts payable = $65000

Other current liabilities = $15000

Formula for quick ratio:

`\text{Quick ratio}=\frac{\text{Cash + Current receivables + short-term investment}}{\text{Current Liabilities}}`

Substitute Cash = 340000, Current receivables=40000, Current Liabilities= (65000+15000).

`\text{Quick ratio}=(340000+40000)/(65000+15000)`

`\text{Quick ratio}=4.75`

Therefore the quick ratio is 4.75:1.