Asked by Nyasia Green on Jul 03, 2024
Verified
Gremel Corporation has provided the following financial data: 
Required:
a.What is the company's working capital?
b.What is the company's current ratio?
c.What is the company's acid-test (quick)ratio?
Acid-test Ratio
A financial ratio indicating a firm's capacity to settle its short-term obligations without selling its stock.
Current Ratio
A financial metric assessing a firm's capability to cover its short-term debts using its short-term assets, determined by dividing current assets by current liabilities.
Working Capital
The difference between a company's current assets and current liabilities, indicating short-term financial health.
- Execute arithmetic operations and perceive the relevance of distinct financial metrics.
- Conduct an evaluation of a company's liquidity status with an emphasis on working capital, current ratio, and acid-test ratio.
Verified Answer
= $639,000 - $307,000 = $332,000
b.Current ratio = Current assets ÷ Current liabilities
= $639,000 ÷ $307,000 = 2.08 (rounded)
c.Acid-test (quick)ratio = Quick assets* ÷ Current liabilities
= $475,000 ÷ $307,000 = 1.55 (rounded)
*Quick assets = Cash + Marketable securities + Current receivables
= $241,000 + $0 + $234,000 = $475,000
Learning Objectives
- Execute arithmetic operations and perceive the relevance of distinct financial metrics.
- Conduct an evaluation of a company's liquidity status with an emphasis on working capital, current ratio, and acid-test ratio.
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