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AP6-14A (Current and quick ratios) The following amounts were reported by Liquid Company in its most recent statement of financial position: Cash Accounts receivable (net) Short-term investments Inventory Prepaid insurance Property, plant, and equipment (net) Accounts payable Wages payable Income tax payable Sales tax payable Notes payable (due within one year) Bank loan payable (due in three years) $ 40,000 130,000 18,000 390,000 35,000 960,000 85,000 37,000 45,000 10,000 90,000 50,000 Required banlup a. Calculate the current ratio and quick ratio for Liquid Company. b. Based on a review of other companies in its industry, the management of Liquid Company thinks it should maintain a current ratio of 2.2 or more and a quick ratio of 0.9 or more. Its current and quick ratios at the end of the prior year were 2.1 and 0.8, respectively. How successful has the company been in achieving the desired results this year? c. How could the company improve its current position? What risks, if any, may be associated with the

AP6-14A (Current and quick ratios) The following amounts were reported by Liquid Company in its most recent statement of financial position: Cash Accounts receivable (net) Short-term investments Inventory Prepaid insurance Property, plant, and equipment (net) Accounts payable Wages payable Income tax payable Sales tax payable Notes payable (due within one year) Bank loan payable (due in three years) $ 40,000 130,000 18,000 390,000 35,000 960,000 85,000 37,000 45,000 10,000 90,000 50,000 Required banlup a. Calculate the current ratio and quick ratio for Liquid Company. b. Based on a review of other companies in its industry, the management of Liquid Company thinks it should maintain a current ratio of 2.2 or more and a quick ratio of 0.9 or more. Its current and quick ratios at the end of the prior year were 2.1 and 0.8, respectively. How successful has the company been in achieving the desired results this year? c. How could the company improve its current position? What risks, if any, may be associated with the

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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AP6-14A (Current and quick ratios) The following amounts were reported by Liquid Company in its most recent statement of financial position: Cash Accounts receivable (net) Short-term investments Inventory Prepaid insurance Property, plant, and equipment (net) Accounts payable Wages payable Income tax payable Sales tax payable Notes payable (due within one year) Bank loan payable (due in three years) $ 40,000 130,000 18,000 390,000 35,000 960,000 85,000 37,000 45,000 10,000 90,000 50,000 Required a. Calculate the current ratio and quick ratio for Liquid Company. b. Based on a review of other companies in its industry, the management of Liquid Company thinks it should maintain a current ratio of 2.2 or more and a quick ratio of 0.9 or more. Its current and quick ratios at the end of the prior year were 2.1 and 0.8, respectively. How successful has the company been in achieving the desired results this year? c. How could the company improve its current position? What risks, if any, may be associated with the strategy you have suggested?
Transcribed Image Text:AP6-14A (Current and quick ratios) The following amounts were reported by Liquid Company in its most recent statement of financial position: Cash Accounts receivable (net) Short-term investments Inventory Prepaid insurance Property, plant, and equipment (net) Accounts payable Wages payable Income tax payable Sales tax payable Notes payable (due within one year) Bank loan payable (due in three years) $ 40,000 130,000 18,000 390,000 35,000 960,000 85,000 37,000 45,000 10,000 90,000 50,000 Required a. Calculate the current ratio and quick ratio for Liquid Company. b. Based on a review of other companies in its industry, the management of Liquid Company thinks it should maintain a current ratio of 2.2 or more and a quick ratio of 0.9 or more. Its current and quick ratios at the end of the prior year were 2.1 and 0.8, respectively. How successful has the company been in achieving the desired results this year? c. How could the company improve its current position? What risks, if any, may be associated with the strategy you have suggested?
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