You are evaluating the balance sheet for PattyCake’s Corporation. From the balan

Question

You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $330,000; accounts receivable = $1,320,000; inventory = $2,220,000; accrued wages and taxes = $560,000; accounts payable = $860,000; and notes payable = $720,000.

  

   

   

  

   

   

You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $330,000; accounts receivable = $1,320,000; inventory = $2,220,000; accrued wages and taxes = $560,000; accounts payable = $860,000; and notes payable = $720,000.

Explanation / Answer

a)

current ratio = current asset /current liabilities

    = 3870000/2140000

   = 1.81

B)Quick ratio = [current asset - Inventory ] / current liabilities

      = [= 3870000 - 2220000] /2140000

        = .77

c) cash ratio = cash and marketable securities / current liabilities

          = 330000/2140000

         = .15 times

cash and marketable securities 330000 accounts receivable 1320000 inventory 2220000 Total asset 3870000 accrued wages and taxes 560000 accounts payable 860000 notes payable 720000 Total current liabilities 2140000

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