Use the following information and calculate the quick ratio for Davis Company and for Bender Inc....
Use the following information and calculate the quick ratio for Davis Company and for Bender Inc. Davis Co. Bender Inc. Account Dr. Cr. Dr. Cr. Cash $321 $425 Cash equivalents 88 95 Current notes receivable 56 46 Accounts receivable 603 307 Prepaid expenses 55 85 Merchandise inventory 714 898 Fixed assets 920 755 Accumulated depreciation—Fixed assets $415 $225 Accounts payable 260 198 Current accrued liabilities 213 149 Mortgage payable 917 824 Capital 952 1,215 Total $2,757 $2,757 $2,611 $2,611 a. Calculate the quick ratio for each company. Round your answers to two decimal places. Davis Co. Quick ratio: Bender Inc. Quick ratio: b. which one is more able to meet current liabilities. would be more liquid.
Homework Answers
Answer a:
Quick ratio = (Cash + Cash equivalents + Current notes receivable + Accounts receivable) / (Accounts payable + Current accrued liabilities)
Davis Co: Quick ratio = (321 + 88 + 56 + 603) / (260 + 213) = 2.26
Bender Inc.: Quick ratio = (425 + 95 + 46 + 307) / (198 + 149) = 2.52
Hence:
Davis Co Quick ratio = 2.26
Bender Inc. Quick ratio = 2.52
Answer b:
Bender Inc.
Both Davis co and Bender Inc. have acceptable quick ratios. As Bender Inc.'s quick ratio is higher than that of Davis Co., Bender Inc. is more liquid.
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Use the following information and calculate the quick ratio for
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