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Timber Tour has a current ratio of 1.5 and a quick ratio of 0.8. Given this,...

Timber Tour has a current ratio of 1.5 and a quick ratio of 0.8. Given this, you know for certain that the firm:

has positive net working capital.
has more cash than inventory.
has more current liabilities than it does current assets.
has more than half its current assets invested in inventory.
pays cash for its inventory.
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Answer #1

Current Ratio = 1.5

Current Assets / Current Liabilities = 1.5 and Quick Ratio = (Cash + Marketable Securities + Accounts Receivable) / Current LIabilities = 0.8

As current ratio >1 (infact 1.5) , Current Assets = 1.5 x Current Liabilities. This implies that Net Working Capital = Current Assets - Current Liabilities > 0

Therefore, the first statement is certainly true.

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