Question

From the information given below, calculate the quick ratio. Particulars Amount (in $) Particulars Amount (in $) Cash 20,000 Accounts payable 11,000 Notes receivable 15,000 Wages payable 5,000 Stock 5,000 Retained earnings 20,000 Inventory 6,000 Notes Payable 8,000 a. .83 times b. 1.08 times c. 1.25 times d. 1.63 times

Answer 1

Answer:

C. 1.25 times

Explanation:

Given: Cash 20,000 Accounts payable 11,000 Notes receivable 15,000 Wages payable 5,000 Stock 5,000 Retained earnings 20,000 Inventory 6,000 Notes Payable 8,000.

Current asset: Cash.

Current Liability: Accounts payable.

Now, calculating the quick ratio.

Formula; Quick ratio= $\frac{Current\ asset- Inventory}{Current\ liability}$

⇒ Quick ratio= $\frac{20000- 6000}{11000}$

⇒ Quick ratio= $\frac{14000}{11000}$

∴ Quick ratio= $1.27 ( 1.25\ is\ closest\ options\ given)$

Hence, Quick ratio is 1.25 times