The balance sheets for Red Oak Inc. and Birch Co. follow. Red Oak Birch Current assets Cash $8,000 $10,000 Short-term investments 3,000 Accounts receivable 40,000 18,000 Inventory 17,000 5,000 Other 5,000 6,000 Noncurrent assets 285,000 317,000 Total assets $358,000 $356,000 Current liabilities $48,000 $30,000 Long-term liabilities 30,000 230,000 280,000 96,000 Stockholders' equity Total liabilities and stockholders' equity $358,000 $356,000 Required Calculate the following ratios and comment on the results. Red Oak: Ratio Numerator Denominator a. Current ratio $ $ b. Quick ratio $ Birch: Ratio Numerator a. Current ratio $ b. Quick ratio $ = Result Denominator Result $ Compared to Birch Company, Red Oak has a: liquidity position.
The balance sheets for Red Oak Inc. and Birch Co. follow. Red Oak Birch Current assets Cash $8,000 $10,000 Short-term investments 3,000 Accounts receivable 40,000 18,000 Inventory 17,000 5,000 Other 5,000 6,000 Noncurrent assets 285,000 317,000 Total assets $358,000 $356,000 Current liabilities $48,000 $30,000 Long-term liabilities 30,000 230,000 280,000 96,000 Stockholders' equity Total liabilities and stockholders' equity $358,000 $356,000 Required Calculate the following ratios and comment on the results. Red Oak: Ratio Numerator Denominator a. Current ratio $ $ b. Quick ratio $ Birch: Ratio Numerator a. Current ratio $ b. Quick ratio $ = Result Denominator Result $ Compared to Birch Company, Red Oak has a: liquidity position.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Only typed solution
Transcribed Image Text:Calculating Liquidity Ratios
The balance sheets for Red Oak Inc. and Birch Co. follow.
Red Oak Birch
Current assets
Cash
$8,000
$10,000
Short-term investments
3,000
Accounts receivable
40,000
18,000
Inventory
17,000
5,000
Other
5,000
6,000
Noncurrent assets
285,000 317,000
Total assets
$358,000 $356,000
Current liabilities
$48,000 $30,000
Long-term liabilities
30,000 230,000
280,000 96,000
Stockholders' equity
Total liabilities and stockholders' equity $358,000 $356,000
Required
Calculate the following ratios and comment on the results.
Red
Oak:
Birch:
Ratio
Numerator
a. Current ratio $
b. Quick ratio
$
Ratio
Numerator
a. Current ratio $
b. Quick ratio $
Denominator
Result
Denominator
Result
$
Compared to Birch Company, Red Oak has a:
+ liquidity position.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 3 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education