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Balance sheet data, quick ratio and working capital

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Question 10/11:

Based on the following data, what is the quick ratio, rounded to one decimal point?

Accounts payable $ 30,000
Accounts receivable 65,000
Accrued liabilities 7,000
Cash 20,000
Intangible assets 40,000
Inventory 72,000
Long-term investments 100,000
Long-term liabilities 75,000
Marketable securities 36,000
Notes payable (short-term) 20,000
Property, plant, and equipment 625,000
Prepaid expenses 2,000

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Solution Preview


(Current Assets - Inventory)/(Current Liabilities)

Let's make a list of the current assets and liabilities.

Current Assets
Accounts receivable 65,000
Cash 20,000
Inventory 72,000
Marketable securities 36,000
Prepaid expenses 2,000
TOTAL $195,000
[There are other assets, such as "Intangible Assets", ...

Solution Summary

The solution explains the quick ratio, excludes accounts not used, and then makes the calculation for the correct answer. It then examines what is included in the working capital and provides the calculations for the correct answer.