d. If amesway sells $1.2 million in new stock and places the proceeds in marketable securities, what happens to its current and quick ratios? New current ratio: New quick ratio:
d. If amesway sells $1.2 million in new stock and places the proceeds in marketable securities, what happens to its current and quick ratios? New current ratio: New 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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"Sub-Parts To Be Solved???"
Transcribed Image Text:The Jamesway Printing Corporation has current assets of $3.2 million. Of this total, $1.2 million is inventory, $0.5 million is cash,
$1.0 million is accounts receivable, and the balance is marketable securities. Jamesway has $1.5 million in current liabilities. Round
your answers to two decimal places.
a. What are the current and the quick ratios for Jamesway?
Current ratio:
2.1333:1 x
Quick ratio:
1.333:1 x
b. If Jamesway takes $0.25 million in cash and pays off $0.25 million of current liabilities, what happens to its current and quick
ratios? What happens to its real liquidity?
New current ratio:
2.36:1 x
New quick ratio:
1.4:1 x
c. If Jamesway sells $0.6 million of its accounts receivable to a bank and uses the proceeds to pay off short-term debt obligations,
what happens to its current and quick ratios?
New current ratio:
2.8889:1 x
New quick ratio:
1.5556:1 x
d. If amesway sells $1.2 million in new stock and places the proceeds in marketable securities, what happens to its current and
quick ratios?
New current ratio:
New quick ratio:
X
Expert Solution
Step 1
Current Ratio & Quick Ratio are calculated to know short-term solvency positions of the company. It shows efficiency of company to meet its short-term liabilities. Ideal Current-Ratio is considered 2:1 and Quick-Ratio is 1:1.
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