Question

Based on the following data, what is the quick ratio, rounded to one decimal? Accounts payable $20,000 Accounts receivable 45,000 Accrued liabilities 7,000 Cash 30,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 100,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 10,000 Property, plant, and equipment 625,000 Prepaid expenses 2,000 a. 3.0 b. 5.0 c. 3.1 d. 4.9

Answer 1

Thus, the quick ratio is 3.0 times so the correct option is a. 3.0 times

Step-by-step explanation:

Quick Ratio : The quick ratio is a liquidity ratio which deals in all currents liabilities and current assets except inventory.

The formula to compute Quick ratio is shown below:

Quick Ratio = Quick assets ÷ Current Liabilities

Where,

Quick assets is accounts receivable, cash, marketable securities which equals to = $45,000 + $30,000 + $36,000 = $111,000

And, Current liabilities is accounts payable, accrued liabilities, notes payable (short term) which equals to

= $20,000 + $7,000 + $10,000

= $37,000

Hence, quick ratio is $111,000 ÷ $37,000 = 3.0 times

Thus, the quick ratio is 3.0 times so the correct option is a. 3.0 times