Working Capital and Short Term Liquidity RatiosBell Company has a current ratio of 2.85 on December 31. On that date the company's current assets are as follows:CashShort-term investmentsAccounts receivable (net)InventoryPrepaid expensesCurrent assetsBell Company's current liabilities at the beginning of the year were $135,000 and during the year its operating activities provided a cash flow of $50,000.$31,40052,000169,000220,00011,600$484,000a. What are the firm's current liabilities on December 31?Round answer to the nearest whole number.169,825b. What is the firm's working capital on December 31?Round answer to the nearest whole number.314,175c. What is the quick ratio on December 31?Round answer to 2 decimal places.1.49d. What is the Bell's operating-cash-flow-to-current-liabilities ratio?Round answer to 2 decimal places.0.29XCheck

Ratio analysis is an integral part of any analysis of any company or entity. It helps identify trends and irregularities and also helps in decision making as a resultThe current ratio current ratio establishes the relationship between current assets and current liabilities. It indicates whether the enterprise will be able to meet its short-term financial obligations as and when they become due for payment.Quick ratio It is also known as acid test ratio. This ratio helps in determining whether the company has enough cash or any easily convertible quick funds to meet its short-term liabilities. It only includes cash or assets that can be converted into cash and into cash equivalent quickly or in a very short period of time. a. Current ratio = Current assets / current liabilities2.85 = $484,000 /current liabilitiesCurrent liabilities on December 31 = $484,000/2.85 = $169825b. Working capital on December 31 = Current assets on December 31 - Current liabilities on December 31= $484,000 - $169,825= $314,175c. Quick ratio on December 31 = (Current assets on December 31 -Inventory - Prepaid expense)/ Current liabilities on December 31= (484000-220000-11600)/169825= 1.49d. Operating-cash-flow-to-current-liabilities ratio = Operating Cash Flow / Average Current Liabilities= $50,000 / [( $135,000 + $169,825) / 2]= $50,000/ $152,412.50= 0.33Answer :(a) Current Liabilities = $169,825(b) Working Capital = $314,175(c) Quick ratio = 1.49(d) Operating cash flow to current liabilities ratio = 0.33

Business

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Working Capital and Short Term Liquidity Ratios Bell Company has a current ratio of 2.85 on December 31. On that date the company's current assets are as follows: Cash Short-term investments Accounts receivable (net) Inventory Prepaid expenses Current assets $31,400 52,000 169,000 220,000 11,600 $484,000 Bell Company's current liabilities at the beginning of the year were $135,000 and during the year its operating activities provided a cash flow of $50,000. a. What are the firm's current liabilities on December 31? Round answer to the nearest whole number. 169,825 b. What is the firm's working capital on December 31? Round answer to the nearest whole number. 314,175 c. What is the quick ratio on December 31? Round answer to 2 decimal places. 1.49 d. What is the Bell's operating-cash-flow-to-current-liabilities ratio? Round answer to 2 decimal places. 0.29 X Check

Working Capital and Short Term Liquidity Ratios Bell Company has a current ratio of 2.85 on December 31. On that date the company's current assets are as follows: Cash Short-term investments Accounts receivable (net) Inventory Prepaid expenses Current assets $31,400 52,000 169,000 220,000 11,600 $484,000 Bell Company's current liabilities at the beginning of the year were $135,000 and during the year its operating activities provided a cash flow of $50,000. a. What are the firm's current liabilities on December 31? Round answer to the nearest whole number. 169,825 b. What is the firm's working capital on December 31? Round answer to the nearest whole number. 314,175 c. What is the quick ratio on December 31? Round answer to 2 decimal places. 1.49 d. What is the Bell's operating-cash-flow-to-current-liabilities ratio? Round answer to 2 decimal places. 0.29 X Check

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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