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ABC Co. has net working capital of $2,000, current liabilities of $4,000, and inventory of $3,500....

ABC Co. has net working capital of $2,000, current liabilities of $4,000, and inventory of $3,500. What is ABC’s current ratio? What is their quick ratio? Show your setup

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Answer #1

Net Working Capital = Current assets - Current Liabilities

2000 = (Quick assets+Inventory) - 4000

2000 = (Quick assets+3500) - 4000

2000 = Quick assets - 500

Quick assets = 2500

A) Current Ratio = Current Assets/Current liabilities

= (2500+3500)/4000

= 1.5 times

B) Quick Ratio = Quick assets/Current Liabilities

= 2500/4000

= 0.63 times

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