22 Gmeiner Co. had the following current assets and liabilities on December 31 o

Question

22

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

A) Determine the quick ratio for December 31 of both years.

B) Interpret the change in the quick ratio between the two balance sheet dates.

Current Year Previous Year Current assets: Cash Accounts receivable Inventory $486,000 210,000 375,000 $1,071,000 500,000 200,000 350,000 $1,050,000 Total current assets Current liabilities: Current portion of long-term debt Accounts payable Accrued and other current liabilities $ 145,000 175,000 260,000 $580,000 110,000 150,000 240,000 $500,000 Total current liabilities

Explanation / Answer

Particulars CY PY Cash        486,000.00    500,000.00 Accounts Receivable        210,000.00    200,000.00 Quick Assets        696,000.00    700,000.00 Current Liabilities        580,000.00    500,000.00 Quick Ratio = Current Assets/current Liab                     1.20                 1.40 Quick Ratio has fallen due to increase in current Liabilities as there are more accrued liab, Portion of LTD becoming current ahs rose and so as Accounts Payable

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