A company has current liability of $500million, and its current ratio is 2.0. If the firm’s quick ratio is 1.2. How much inventory does it have? a. $400milliom b. $600milliom c. $300million d. $500million
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
A company has current liability of $500million, and its current ratio is 2.0. If the firm’s quick ratio
is 1.2. How much inventory does it have?
a. $400milliom
b. $600milliom
c. $300million
d. $500million
To calculate the inventory we will use the below formula
Inventory = (Current liability*Current ratio)-(Current liability*Quick ratio)
Where
Current liability = $500million
Current ratio = 2.0
Quick ratio = 1.2
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