Selected condensed data taken from a recent balance sheet of Heidebrecht Inc. ar

Question

Selected condensed data taken from a recent balance sheet of Heidebrecht Inc. are as follows.

HEIDEBRECHT INC.
Balance Sheet (partial)

What are the (a) working capital, (b) current ratio, and (c) acid-test ratio? (Round ratios to 2 decimal places, e.g. 1.58 : 1.)

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HEIDEBRECHT INC.
Balance Sheet (partial)

Cash $8,090,000 Short-term investments 5,080,000 Accounts receivable 12,160,000 Inventory 14,700,000 Other current assets 5,530,000 Total current assets $45,560,000 Total current liabilities $40,270,000

Explanation / Answer

(a) Working Capital = Current Assets - Current Liabilities

Working Capital = 45560000 - 40270000 = $5290000

(b) Current ratio = Current Assets / Current Liabilities

Current ratio = 45560000 / 40270000 = 1.13 : 1

(c) Acid Test Ratio = (Current Assets - Inventory) / Current Liabilities

Acid Test Ratio = (45560000 - 14700000) / 40270000 = .77 : 1

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