Question

Total current assests(CA)$20,000
Accounts receivable(AR) $10,000
Current Liabilities(CL) $11,000
Inventory(INV) $4,000
Net sales $30,000
Total assests $25,000
Net income $5,000

1. Calculate current ratio.

A. 1.82
B. 1.80
C. 1.28
D .182


2.Calculate acid test.
A. 1.52
B. 1.45
C. .152
D. .145

Answer 1

i) As per the rule CR=CA/CL
=$20,000/$11,000=1.818181818181818 = Can round it to 1.82 (A)

ii) Current Acid or Quick Ratio= Quick Assets/CL
=$16,000/$11,000=1.454545454545455 = Answer (B)