A company has current assets of $90,000 (of which $36,000 is inventory and prepaid items) and current liabilities of $36,000. a. What is the current ratio? b. What is the acid-test ratio? c. If the company borrows $16,000 cash from a bank on a 120-day loan, what will its current ratio be? d. What will the acid-test ratio be?
A company has current assets of $90,000 (of which $36,000 is inventory and prepaid items) and current liabilities of $36,000. a. What is the current ratio? b. What is the acid-test ratio? c. If the company borrows $16,000 cash from a bank on a 120-day loan, what will its current ratio be? d. What will the acid-test ratio be?
Chapter5: Evaluating Operating And Financial Performance
Section: Chapter Questions
Problem 4EP
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Answer the following requirements
Transcribed Image Text:A company has current assets of $90,000 (of which
$36,000 is inventory and prepaid items) and
current liabilities of $36,000.
a. What is the current ratio?
b. What is the acid-test ratio?
c. If the company borrows $16,000 cash from a
bank on a 120-day loan, what will its current ratio
be?
d. What will the acid-test ratio be?
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