Homework Answers
The ratios for 1990 are as follows:
1. Working Capital = Current Assets - Current Liabilities
= 405,000 - 160,000
= $245,000
2. Current Ratio = Current Assets ÷ Current Liabilities
= $405,000 ÷ $160,000
= 2.53 (approx.)
3. Quick (Acid Test) Ratio =
( Cash + Marketable Securities + Accounts Receivable) ÷ Current Liabilities
=( 70,000 + 25,000 + 120,000) ÷ 160,000
= 215,000 ÷ 160,000
= 1.34 (approx.)
4. Inventory Turnover = Cost of goods sold÷Average Inventory
= 2,500,000 ÷ 215,000
= 11.63 (approx.)
5. Accounts Receivable Turnover =
Credit Sales ÷ Average Accounts Receivables
= $3,000,000 ÷ $130,000
= 23.08 (approx.)
Working Note :
1. Current Assets $
Cash 70,000
Marketable Securities 25,000
Accounts Receivable 120,000
Merchandise Inventory 190,000
Total Current Assets $405,000
2. Current Liabilities = $160,000
3. Average Inventory = (190,000 + 240,000 ) ÷ 2 = $315,000
4. Average Accounts Receivables =
(120,000 + 140,000) ÷ 2 = $130,000
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