Question

Lionel, Inc., has current assets of $663,881, including inventory of $256,496, and current liabilities of $421,448. What is the quick ratio? Round your final answer to the nearest two decimals if needed.

Answer 1

The quick ratio for Lionel, Inc. is approximately 0.97 when rounded to two decimals, indicating their ability to cover current liabilities with quick assets.

Step-by-step explanation:

The quick ratio is a measure of a company's ability to pay off its current liabilities with its most liquid assets. It is calculated by subtracting the inventory from the current assets and dividing the result by the current liabilities.

In this case, the current assets amount to $663,881, with inventory representing $256,496. So the quick assets would be $663,881 - $256,496 = $407,385. The current liabilities amount to $421,448. Therefore, the quick ratio would be $407,385 / $421,448, which equals approximately 0.97 when rounded to two decimals.

This means that for every dollar of current liabilities, Lionel, Inc. has approximately $0.97 of quick assets available to cover those obligations.