Asked by Sepideh Rastin on Jun 12, 2024
Verified
The following items are reported on Denver Company's balance sheet:?? Cash $190,000 Marketable securities 160,000 Accounts receivable (net) 240,000 Inventory 350,000 Accounts payable 600,000\begin{array} { l r } \text { Cash } & \$ 190,000 \\\text { Marketable securities } & 160,000 \\\text { Accounts receivable (net) } & 240,000 \\\text { Inventory } & 350,000 \\\text { Accounts payable } & 600,000\end{array} Cash Marketable securities Accounts receivable (net) Inventory Accounts payable $190,000160,000240,000350,000600,000 Determine the (a) current ratio and (b) quick ratio. Round your answers to one decimal place.
Current Ratio
An indicator of a business's capability to cover its obligations due in less than a year, determined by dividing the total of current assets by the total of current liabilities.
Marketable Securities
Financial instruments that can be easily converted to cash, such as stocks or bonds.
- Conduct calculations and convey explanations for crucial financial ratios including the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.
Verified Answer
FS
Fatmiah Saleh S AlMenhalyJun 18, 2024
Final Answer :
(a)Current Ratio = Current Assets/Current LiabilitiesCurrent Ratio = ($190,000 + $160,000 + $240,000 + $350,000)/$600,000Current Ratio = 1.6
(b)Quick Ratio = Quick Assets/Current LiabilitiesQuick Ratio =
($190,000 + $160,000 + $240,000)/$600,000Quick Ratio = 1.0
(b)Quick Ratio = Quick Assets/Current LiabilitiesQuick Ratio =
($190,000 + $160,000 + $240,000)/$600,000Quick Ratio = 1.0
Learning Objectives
- Conduct calculations and convey explanations for crucial financial ratios including the current ratio, quick ratio, inventory turnover, accounts receivable turnover, and times interest earned.