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lizawr
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Asked: 2022-04-11T18:59:52+00:00 In:

Based on the above data, what is the quick ratio, rounded to one decimal point?

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Based on the above data, what is the quick ratio, rounded to one decimal point?
 
a. 2.4
b. 3.4
c. 2.1
d. 1.5
 
Accounts payable                                $30,000
Accounts receivable                            65,000
Accrued liabilities                                 7,000
Cash                                                        20,000
Intangible assets                                  40,000
Inventory                                                72,000
Long-term investments                       100,000
Long-term liabilities                             75,000
Marketable securities                           36,000
Notes payable (short-term)                 20,000
Property, plant, and equipment           625,000
Prepaid expenses                                   2,000

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♦ Relevant knowledge

A quick ratio refers to a calculation that determines a company’s capacity to meet its short-term obligations. The quick ratio considers the current asset (minus inventories) and compares it with current liabilities. It is the sum total of the company’s cash along with inventory assets that are not inventoried and are quickly converted into cash, and divided by the short-term financial obligations of the company.

Applications of the Quick Ratio in Accounting: There are many instances where it is beneficial to have a quick ratio. Financial institutions may use quick ratios in conjunction with current ratio to assess the company’s financial stability in making loan decisions. Investors will also use the quick ratio to determine the companies that are worth investing in.

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1 Answer

  1. Best Answer

    Quick ratio = (Total assets – inventories – prepaid expenses) / Total liabilities

    Quick ratio = ($65,000+$20,000+$36,000) / ($30,000+$7,000+$20,000)

    Quick ratio = 2.1

    Answer: C. 2.1

    If you have any questions, please feel free to contact me via the comment box. Please rate this answer

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