Question

SDJ, Incorporated, has net working capital of $2,630, current liabilities of $5,970, and inventory of $3,860.

a. What is the current ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
b. What is the quick ratio? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
a. Current ratio ------ times
b. Quick ratio ------- times

Answer 1

The quick ratio for SDJ, Incorporated is calculated as ($8,600 current assets - $3,860 inventory) / $5,970 current liabilities, resulting in a quick ratio of approximately 0.794 times.

Step-by-step explanation:

The question is related to calculating the quick ratio for SDJ, Incorporated. The quick ratio is a measure of a company's short-term liquidity, with the ability to pay off its current liabilities without relying on the sale of inventory. To calculate the quick ratio, we subtract inventory from current assets and then divide by current liabilities.

To find the current assets, we can use the given net working capital and add it to the current liabilities. Net working capital is calculated as current assets minus current liabilities, so current assets = net working capital + current liabilities = $2,630 + $5,970 = $8,600. Then we calculate the quick ratio as ($8,600 - inventory) / current liabilities = ($8,600 - $3,860) / $5,970, which simplifies to $4,740 / $5,970, resulting in a quick ratio of approximately 0.794 times.