Why prepaid expense are not considered in quick and cash ratio?
Homework Answers
Solution:
Quick ratio = quick assets ÷ current liabilities
Quick assets are the current assets which are converted into cash in short period of time.
Current assets include prepaid expense but it is not considered as a liquid asset like cash, short term investments, accounts receivables and other marketable securities which are converted into cash with in a short period of time.
So as per above explanation prepaid expenses are considered as illiquid asset and not considered for quick asset ratio.
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the quick ratio differs from the current ratio a. because prepaid expenses and inventory are excluded...
the quick ratio differs from the current ratio a. because prepaid expenses and inventory are excluded b. because prepaid expenses and inventory are excluded and because it measures profitability
Pick one financial ratio ( current ratio, quick ratio or cash ratio) and discuss its benefits...
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prepaid expenses = $50,000 Problem 3 Calculate the following information: 1. Quick ratio 2. Accounts receivable...
prepaid expenses = $50,000
Problem 3 Calculate the following information: 1. Quick ratio 2. Accounts receivable turnover ratio 3. Net return on total assets 4. Total liabilities to total assets ratio 5. Times interest earned ratio 6. Return on sales 7. Return on equity Sales: $750,000 Cash: $50,000 Inventory: $150,000 Common Stock: $100,000 Accounts Payable: $100,000 Prepaid expenses: $50,000 Long term debt: $200,000 Land and Building: $500,000 Operating Income: $450,000 Taxes: $200,000 Accounts Receivable: $70,000 Retained Earnings: $400,000 Cost of...
(prepaid expenses are $50,000) Problem 3 Calculate the following information: 1. Quick ratio 2. Accounts receivable...
(prepaid expenses are $50,000)
Problem 3 Calculate the following information: 1. Quick ratio 2. Accounts receivable turnover ratio 3. Net return on total assets 4. Total liabilities to total assets ratio 5. Times interest earned ratio 6. Return on sales 7. Return on equity Sales: $750,000 Cash: $50,000 Inventory: $150,000 Common Stock: $100,000 Accounts Payable: $100,000 Prepaid expenses: $50,000 Long term debt: $200,000 Land and Building: $500,000 Operating Income: $450,000 Taxes: $200,000 Accounts Receivable: $70,000 Retained Earnings: $400,000 Cost of...
7) Which of the following is considered to be a liability (2pts) O Prepaid Expense O...
7) Which of the following is considered to be a liability (2pts) O Prepaid Expense O Accrued Revenues O Investments Unearned Revenue
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• Current ratio • Quick ratio • Cash ration • Total debit ratio • Equity multiplier • Time interest earned ratio • Capital intensity • Total asset turnover • Profit margin • Return on assets please explain in accounting terms
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Calculate the current ratio and the quick ratio for the following partial financial statement for Tootsie Roll. (Round your answers to the nearest hundredth.) Assets Liabilities; Current assets: Cash and cash equivalents (Note 1) $ 4,364,190 Investments (Note 1) 32,673,769 Accounts receivable, less allowances of $762,000 and $758,000 16,346,648 Inventories (Note 1 Finished goods and work in progress 12,790,955 Raw materials and supplies 10,415,858 Prepaid expenses 2,177,710 Current liabilities: Notes payable to banks $ 532,221 Accounts payable 6,864,075 Dividends payable...
true or false from a liquidity perspective, the cash ratio is stricter than the quick ratio...
true or false from a liquidity perspective, the cash ratio is stricter than the quick ratio and the current ratio compared to a chain of luxury hotels, a chain of pizza restaurants should have a higher asset turnover, but a lower operating profit margin quick ratio = ( current assets- inventory ) / current liabilities return on equity = EBIT / equity at the end of 2017, amazon’s cash conversion cycle was minus 21.6 days; its average collection period was...
Questions: 1. Compute the following ratios for PAYPAL HOLDINGS INC: CURRENT RATIO QUICK RATIO CASH RATIO...
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prepaid expenses = $50,000
Problem 3 Calculate the following information: 1. Quick ratio 2. Accounts receivable turnover ratio 3. Net return on total assets 4. Total liabilities to total assets ratio 5. Times interest earned ratio 6. Return on sales 7. Return on equity Sales: $750,000 Cash: $50,000 Inventory: $150,000 Common Stock: $100,000 Accounts Payable: $100,000 Prepaid expenses: $50,000 Long term debt: $200,000 Land and Building: $500,000 Operating Income: $450,000 Taxes: $200,000 Accounts Receivable: $70,000 Retained Earnings: $400,000 Cost of...
(prepaid expenses are $50,000)
Problem 3 Calculate the following information: 1. Quick ratio 2. Accounts receivable turnover ratio 3. Net return on total assets 4. Total liabilities to total assets ratio 5. Times interest earned ratio 6. Return on sales 7. Return on equity Sales: $750,000 Cash: $50,000 Inventory: $150,000 Common Stock: $100,000 Accounts Payable: $100,000 Prepaid expenses: $50,000 Long term debt: $200,000 Land and Building: $500,000 Operating Income: $450,000 Taxes: $200,000 Accounts Receivable: $70,000 Retained Earnings: $400,000 Cost of...
7) Which of the following is considered to be a liability (2pts) O Prepaid Expense O Accrued Revenues O Investments Unearned Revenue
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