Question

The Golden Braid Bookstore currently has $340,000 in cash, $280,000 in inventory, and $40,000 in accounts receivable. The company also has $65,000 in accounts payable, and $15,000 in other current liabilities. What is its quick ratio?

Answer 1

Answer:

The quick ratio is 4.75:1.

Step-by-step explanation:

From the given information it is clear that:

Cash = $340,000

Inventory = $280,000

Accounts receivable =  $40,000

Accounts payable = $65000

Other current liabilities = $15000

Formula for quick ratio:

$\text{Quick ratio}=\frac{\text{Cash + Current receivables + short-term investment}}{\text{Current Liabilities}}$

Substitute Cash = 340000, Current receivables=40000, Current Liabilities= (65000+15000).

$\text{Quick ratio}=\frac{340000+40000}{65000+15000}$

$\text{Quick ratio}=4.75$

Therefore the quick ratio is 4.75:1.