Question

Based on the following data, what is the quick ratio, rounded to one decimal point?

Accounts payable. $ 30,000
Accounts receivable. 60,000
Accrued liabilities 4,000
Cash 60,000
Fixed assets 670,000
Intangible assets 50,000
Inventory 69,000
Long-term investments 80,000
Long-term liabilities. 100,000
Prepaid expenses. 1,000
Temporary investments. 50,000
a.5.0
b.1.3
c.7.1
d.6.5

Answer 1

The quick ratio is calculated by adding cash, marketable securities, and accounts receivable, and then dividing by current liabilities. Based on the provided data, the quick ratio is approximately 5.0. So the correct answer is option A.

Step-by-step explanation:

The quick ratio, also known as the acid-test ratio, is a measure of a company's ability to meet its short-term obligations with its most liquid assets. The formula to calculate the quick ratio is:

Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) ÷ Current Liabilities

Based on the provided data, the calculation is as follows:

Quick Ratio = (60,000 + 50,000 + 60,000) ÷ (30,000 + 4,000)
Quick Ratio = 170,000 ÷ 34,000
Quick Ratio ≈ 5.0

Therefore, the quick ratio, rounded to one decimal point, is 5.0.

Total quick assets = Cash + Accounts Receivable + Temporary Investments = $60,000 + $60,000 + $50,000 = $170,000

Current liabilities = Accounts Payable + Accrued Liabilities + Long-term Liabilities = $30,000 + $4,000 + $100,000 = $134,000

Quick Ratio = Total quick assets / Current liabilities = $170,000 / $134,000 ≈ 1.3