Answered: The 2021 Balance Sheet of Eighty-Five…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

The 2021 Balance Sheet of Eighty-Five Ltd. show a total of $100,000 in current assets, which is made up of $35,000 (cash), $15,000 (marketable securities), $20,000 (net receivables) and inventories (that make up the difference). If the company’s current liabilities for the year is $55,000, what is its quick ratio?

		1.273.
		0.780.
		1.000.
		1.875.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Expert Solution

Step 1

Quick Ratio :— It is the ratio of quick assets and current liabilities.

Quick ratio = Quick Assets/Current Liabilities

Quick Ratio

= (Current Assets — Inventory — Prepaid expenses)/Current liabilities

Quick Ratio

= (Cash + Accounts Receivable + Marketable securities)/Current Liabilities

Quick Assets :— It is the assets that are easily convertible to cash.

Example — Cash, accounts Receivable, Marketable securities, etc

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