Current Position Analysis The following items are reported on a company's balance sheet: Cash $360,600 Marketable securities 281,800 Accounts receivable (net) 190,600 Inventory 294,000 Accounts payable 490,000 Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place. a. Current ratio b. Quick ratio
Current Position Analysis The following items are reported on a company's balance sheet: Cash $360,600 Marketable securities 281,800 Accounts receivable (net) 190,600 Inventory 294,000 Accounts payable 490,000 Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place. a. Current ratio b. Quick ratio
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Current position analysis
![### Current Position Analysis
**Current Position Analysis**
The following items are reported on a company's balance sheet:
- **Cash**: $360,600
- **Marketable securities**: $281,800
- **Accounts receivable (net)**: $190,600
- **Inventory**: $294,000
- **Accounts payable**: $490,000
Determine:
(a) the **current ratio** and
(b) the **quick ratio**.
Round to one decimal place.
**a. Current ratio**
**b. Quick ratio**
---
**Explanation of Ratios:**
- **Current Ratio**: The current ratio measures a company's ability to pay short-term obligations with its current assets. It is calculated as:
\[
\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}
\]
- **Quick Ratio (Acid-Test Ratio)**: The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. It excludes inventory from current assets. It is calculated as:
\[
\text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}
\]
where Quick Assets = Current Assets - Inventory](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0da0a9ed-480c-4a1e-9dd3-aae3fbebf8de%2F357fae38-0863-4803-9d51-bc760f755ec4%2F92s6ta_processed.jpeg&w=3840&q=75)
Transcribed Image Text:### Current Position Analysis
**Current Position Analysis**
The following items are reported on a company's balance sheet:
- **Cash**: $360,600
- **Marketable securities**: $281,800
- **Accounts receivable (net)**: $190,600
- **Inventory**: $294,000
- **Accounts payable**: $490,000
Determine:
(a) the **current ratio** and
(b) the **quick ratio**.
Round to one decimal place.
**a. Current ratio**
**b. Quick ratio**
---
**Explanation of Ratios:**
- **Current Ratio**: The current ratio measures a company's ability to pay short-term obligations with its current assets. It is calculated as:
\[
\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}
\]
- **Quick Ratio (Acid-Test Ratio)**: The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. It excludes inventory from current assets. It is calculated as:
\[
\text{Quick Ratio} = \frac{\text{Quick Assets}}{\text{Current Liabilities}}
\]
where Quick Assets = Current Assets - Inventory
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