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A company has​ $28,000 in cash and cash​ equivalents, $88,000 in shortminusterm ​investments, $122,000 in net current​ receivables, $64,000 in​ inventory, $14,000 of prepaid insurance and​ $11,000 of supplies. The total current liabilities of the firm are​ $304,000. The quick ratio of the company​ is: (Round your final answer to two decimal​ places.)

Respuesta :

Given: Cash and Cash Equivalents = $28,000

           Short term investments = $88,000

           Net Current Receivables = $122,000

           Inventory = $64,000

           Prepaid Insurance = $14,000

           Supplies = $11,000

           Total current liabilities = $304,000

To Calculate: Quick Ratio

Solution: Quick ratio for a company represents it's ability to pay off it's current liabilities as and when they accrue. The ratio is computed as,

= [tex]\frac{Quick\ Assets}{Current\ Liabilities}[/tex]

Quick assets are those assets which can be quickly convertible into cash within a period of 90 days.

Quick Assets = Cash and cash equivalents + short term investments + current accounts receivables + marketable securities

Thus, Quick Assets = $28000 + 88,000 + 122,000 = $ 238,000

        Current Liabilities = $304,000

Thus, Quick Ratio = [tex]\frac{238,000}{304,000}[/tex] = 0.78 approx.

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