Question

SDJ, Inc., has net working capital of $3,640, current liabilities of $5,430, and inventory of $4,290. a. What is the current ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.) b. What is the quick ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places, e.g., 32.16.)

Answer 1

Answer and Explanation:

The computation is shown below:

a. For current ratio

Current ratio = Current assets ÷ current liabilities

Before that first determine the current assets

As we know that

Net working capital = Current asset - Current liability

$3,640 = Current asset - $5,430

So,

Current asset is

= $3,640 + $5,430

= $9,070

Now the current ratio is

= $9,070 ÷ $5,430

= 1.67 times

b. The quick ratio is

Quick ratio = (Current asset - Inventory) ÷ Current liability

= ($9,070 - $4,290)÷ $5,430

= $4,780 ÷ $5,430

= 0.88 times