Camaro GTO Torino Cash $ 2,400 $ 230 $ 1,300 Short-term investments 0 0 600 Current receivables 260 510 500 Inventory 2,175 2,020 3,050 Prepaid expenses 300 600 900 Total current assets $ 5,135 $ 3,360 $ 6,350 Current liabilities $ 2,220 $ 1,320 $ 3,550 a. Compute the acid-test ratio for each of the separate cases above. b. Which company is in the best position to meet short-term obligations?
Camaro GTO Torino Cash $ 2,400 $ 230 $ 1,300 Short-term investments 0 0 600 Current receivables 260 510 500 Inventory 2,175 2,020 3,050 Prepaid expenses 300 600 900 Total current assets $ 5,135 $ 3,360 $ 6,350 Current liabilities $ 2,220 $ 1,320 $ 3,550 a. Compute the acid-test ratio for each of the separate cases above. b. Which company is in the best position to meet short-term obligations?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
| Camaro | GTO | Torino | |
|---|---|---|---|
| Cash | $ 2,400 | $ 230 | $ 1,300 |
| Short-term investments | 0 | 0 | 600 |
| Current receivables | 260 | 510 | 500 |
| Inventory | 2,175 | 2,020 | 3,050 |
| Prepaid expenses | 300 | 600 | 900 |
| Total current assets | $ 5,135 | $ 3,360 | $ 6,350 |
| Current liabilities | $ 2,220 | $ 1,320 | $ 3,550 |
a. Compute the acid-test ratio for each of the separate cases above.
b. Which company is in the best position to meet short-term obligations?
Transcribed Image Text:Compute the acid-test ratio for each of the separate cases above.
Camaro
GTO
Torino
Numerator:
1
1
1
1
Acid-Test Ratio
Denominator:
< Required A
=
=
=
Acid-Test Ratio
Acid-test ratio
to 1
to 1
to 1
Required B >
Expert Solution
Step 1
Solution:
Acid test ratio = Quick Assets / Current liabilities
Quick assets = Current assets - Inventory - Prepaid expenses
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