Question

The Young Company has the following assets and liabilities:ASSETS Cash $35,000 Accounts receivable 15,000 Inventory 30,000 Equipment 50,000LIABILITIES Current portion of long-term debt 10,000 Accounts payable 2,000 Long-term debt 25,000Determine the quick ratio (rounded to one decimal point).(A) 13.0(B) 4.2(C) 6.7(D) 3.5

Answer 1

(B) 4.2 times

Step-by-step explanation:

The computation of the quick ratio is shown below:

Quick ratio = Quick assets ÷ total current liabilities

where,

Quick assets = Cash + Accounts receivable

= $35,000 + $15,000

= $50,00 0

And, the current liabilities include current portion of long term debt and accounts payable

= $10,000 + $2,000

= $12,000

Now put these values to the above formula

So, the value would equal to

= $50,000 ÷ $12,000

= 4.2 times