Question

Monika's gift barn has cash of $316, accounts receivable of $687, accounts payable of $709, and inventory of $2,108. what is the value of the quick ratio?

Answer 1

Given:
Cash = $316
Accounts receivable = $687
Accounts payable = $709 (Liabilities)
Inventory = $2,108 (Assets)

Total assets = Cash + Receivables
= 316 + 687 = $1,003
Liabilities = $709

By definition, the quick ratio is
QR = (Assets - Inventory) / Liabilities
= (1003 - 2108)/709
= -1.5585

This means that the gift barn is over-leveraged and struggling to grow.

Answer: -1.56