Question

The Golden Braid Bookstore has a quick ratio (Acid Test) of 4.75:1, $40,000 in accounts receivable, and liabilities totaling $80,000. How much cash do they have?

Answer 1

Answer:

Golden Braid Bookstore has $340,000 in cash

Explanation:

Quick ratio=current assets-inventory/current liabilities

Based on the information provided in this question,the quick ratio can be modified(no inventory,cash and accounts receivables are the only current assets)

quick ratio=accounts receivables+cash/current liabilities

quick ratio is 4.75/1

accounts receivables is $40,000

cash is unknown,taken as C

current liabilities is $80,000

4.75=$40,000+C/$80,000

By cross multiplication

4.75*$80,000=$40,000+C

C=(4.75*$80,000)-$40,000

C=$380,000-$40,000

C=$340,000