Question

For the FY 2016, Alpha Company's balance sheet included the following current items: cash $40,000, accounts receivable $160,000, inventories $100,000, prepaid expenses $20,000, accounts payable $90,000, and accrued expenses $70,000. Use this information to determine the: (Round & enter your answers to one decimal place for non-dollar ratios and enter the value. For dollar ratio enter as whole dollars only.) 1. Quick Ratio 2. Current Ratio 3. Working Capital

Answer 1

	Alpha Company's
	Current Ratio
	Current Assets/Current Liabilities
	Current Assets
	Cash	$                     40,000.00
	Accounts Receivable	$                  1,60,000.00
	Inventory	$                  1,00,000.00
	Prepaid Expenses	$                     20,000.00
	Total Current Assets=(A)	$                  3,20,000.00
	Current Liabilities
	Accounts Payable	$                     90,000.00
	Accrued Expenses	$                     70,000.00
	Total Current Liabilities=(B)	$                  1,60,000.00
	Current Ratio=(A)/(B)	(2:1)
	Quick Ratio
	Quick Assets/Current Liabilities
	Quick Assets
	Cash	$                     40,000.00
	Accounts Receivable	$                  1,60,000.00
	Total Quick Assets=(A)	$                  2,00,000.00
	Current Liabilities
	Accounts Payable	$                     90,000.00
	Accrued Expenses	$                     70,000.00
	Total Current Liabilities=(B)	$                  1,60,000.00
	Quick Ratio=(A)/(B)	(1.25:1)
	Working Capital=Current Assets-Current Liabilities
	Current Assets=(A)	$                  3,20,000.00
	Current Liabilities=(B)	$                  1,60,000.00
	Working Capital=(A)-(B)	$                  1,60,000.00