Question

The financial statements of Clearwater Furniture Company include the following items:

20172016
Cash$63,500$51,000
Short-term Investments28,00017,000
Net Accounts Receivable 94,000106,000
Merchandise Inventory157,000143,000
Total Assets531,000544,000
Total Current Liabilities234,000217,000
Long-term Note Payable 62,00052,000

What is 2017 cash ratio? (Round your answer to two decimal places)
a. 0.21
b. 0.12
c. 0.39
d. 0.27

Answer 1

c. 0.39

Step-by-step explanation:

The formula to compute the 2017 cash ratio is shown below:

= (Cash + Short-term Investments) ÷ (Total Current Liabilities)

= (63,500 + $51,000) ÷ (234,000)

= ($114,500) ÷ (234,000)

= 0.39

It shows a ratio between cash + cash equivalent and the current liabilities.

The other information which is given in the question is not relevant. Hence, ignored it