Final answer:
The current ratio of SDJ, Incorporated is 1.18, indicating it can cover its short-term liabilities with its short-term assets. The quick ratio is approximately 1.00, suggesting that the company can meet its immediate financial obligations with its most liquid assets.
Step-by-step explanation:
The current ratio is a measure of a company's ability to pay off its short-term liabilities with its short-term assets. The equation to calculate the current ratio is Current Assets ÷ Current Liabilities. In the case of SDJ, Incorporated, the net working capital, which is the difference between current assets and current liabilities, is given as $1,240.
Since net working capital is Current Assets minus Current Liabilities, and we know the Current Liabilities are $6,800, we can deduce that Current Assets equals $8,040 ($6,800 + $1,240). Therefore, the current ratio is $8,040 ÷ $6,800 which equals approximately 1.18.
The quick ratio, also known as the acid-test ratio, is a measure of a company's ability to meet its short-term obligations with its most liquid assets. The equation to calculate the quick ratio is (Current Assets - Inventory) ÷ Current Liabilities. Using SDJ, Incorporated's figures, the quick ratio would be calculated as ($8,040 - $1,210) ÷ $6,800, resulting in a quick ratio of approximately 1.00.
SDJ, Incorporated's current ratio is 1.18 and the quick ratio is approximately 1.00, calculating with provided financial figures.