Asked by Masaki Sakurai on Jun 30, 2024
Verified
The following items are reported on Denver Company's balance sheet: 
Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place.
Quick Ratio
A financial metric that measures a company's ability to meet its short-term obligations with its most liquid assets.
Current Ratio
A liquidity measure indicating a company’s ability to meet short-term obligations with its short-term assets.
Decimal Place
A position to the right of a decimal point in a number, representing a fraction of a whole.
- Build competence in the application of financial ratio analysis to determine a company’s financial performance, including profitability, liquidity, and its ability to sustain operations.
- Detect and quantify multiple financial proportions including debt to equity ratio, times interest earned, current ratio, and quick ratio.
Verified Answer
Current ratio = ($190,000 + $160,000 + $240,000 + $350,000) ÷ $600,000
Current ratio = 1.6
(b)Quick ratio = Quick assets ÷ Current liabilities
Quick ratio = ($190,000 + $160,000 + $240,000) ÷ $600,000
Quick ratio = 1.0
Learning Objectives
- Build competence in the application of financial ratio analysis to determine a company’s financial performance, including profitability, liquidity, and its ability to sustain operations.
- Detect and quantify multiple financial proportions including debt to equity ratio, times interest earned, current ratio, and quick ratio.
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