Question

Emma Jones Company has the following information​ available: Account ​12/31/2019 ​12/31/2018 Accounts Payable ​$76,500 ​$80,000 Accounts​ Receivable, net ​42,300 ​49,000 Cash and Cash Equivalents ​43,700 ​70,000 Inventories ​100,000 ​99,000 LongminusTerm Investments ​20,000 ​100,000 ShortminusTerm Investments ​27,000 ​44,000 Income Taxes Payable ​2,000 ​5,000 LongminusTerm Notes Payable ​20,000 ​30,000 Did the quick ratio improve from 2018 to​ 2019? A. Yes. B. No. C. It stayed the same. D. There is not enough information.

Answer 1

B. No.

Step-by-step explanation:

The formula to compute the quick ratio is shown below:

Quick ratio = (Quick assets) ÷ (current liabilities)

where,

For 2018

Quick assets = Accounts​ Receivable, net + Cash and Cash Equivalents + Short minus Term Investments

= $49,000 + $70,000 + $44,000

= $163,000

And, the current liabilities = Accounts Payable + Income Taxes Payable

= ​$80,000 + 5,000

= $85,000

Now put these values to the above formula

So, the ratio would equal to

= $163,000 ÷ $90,000

= 1.81 times

For 2019

Quick assets = Accounts​ Receivable, net + Cash and Cash Equivalents + Short minus Term Investments

= $42,300 + $43,700 + $27,000

= $113,000

And, the current liabilities = Accounts Payable + Income Taxes Payable

= ​$76,500 + 2,000

= $78,500

Now put these values to the above formula

So, the ratio would equal to

= $113,000 ÷ $78,500

= 1.43 times

No, as it shows declining from 2018 to 2019