Question

Quick Ratio

Gmeiner Co. had the following current assets and liabilities on December 31 of two recent years:

				Current Year		Previous Year
Current assets:
	Cash			$563,000		$524,000
	Accounts receivable			499,000		246,000
	Inventory			308,000		208,000
		Total current assets		$1,370,000		$978,000
Current liabilities:
	Current portion of long-term debt			$94,000		$83,000
	Accounts payable			189,000		165,000
	Accrued and other current liabilities			307,000		302,000
		Total current liabilities		$590,000		$550,000

a. Determine the quick ratio for December 31 of both years. If required, round your answers to one decimal place.

	Quick Ratio
Previous year:
Current year:

b. How did the quick ratio change between the two balance sheet dates?

Answer 1

Ans a)-Quick ratio Previous year = 1.4:1

Current year = 1.8:1

working-

Quick Ratio = (Current Assets – Inventory)/ Current Liabilities

Previous Year:
Quick Ratio = ($978,000 – $208,000) / $550,000
Quick Ratio = 770,000 / 550,000
Quick Ratio = 1.4 : 1

Current Year:
Quick Ratio = ($1,370,000 – $308,000) / $590,000
Quick Ratio = 1,062,000 / 590,000
Quick Ratio = 1.8 : 1

Ans b)-Quick Ratio is Increased between two balence sheets