Question

Find Current Assets backwards via ratios.

Inventories: $840,000
Total assets: $2,800,000
Current Ratio: 2.25
Quick Ratio: 1.20
Debt to Equity ratio: 1.8

Answer 1

To find current assets backwards using ratios, we can use the current ratio and the quick ratio. By setting up equations using these ratios and the given information, we can solve for the current assets. $1,800,000.

Step-by-step explanation:

To find the current assets backwards, we can use the current ratio. The current ratio is calculated by dividing current assets by current liabilities. In this case, the current ratio is given as 2.25. We can set up the equation as follows:

Current Assets / Current Liabilities = 2.25

Let's assume Current Liabilities as 'x'. Then, Current Assets can be calculated as 2.25 times 'x'.

Since the Quick Ratio (also known as Acid-Test Ratio) is given as 1.20, we can set up another equation:

(Current Assets - Inventories) / Current Liabilities = 1.20

Using the information provided, we can solve for Current Assets:

(2.25x) - 840,000 = 1.20x

2.25x - 1.20x = 840,000

1.05x = 840,000

x = 800,000

Therefore, Current Assets can be calculated as 2.25 times 800,000, which equals $1,800,000.