Jessica\'s Boutique has cash of $51. Their Balance Sheet records accounts receiv

Question

Jessica's Boutique has cash of $51. Their Balance Sheet records accounts receivable of $66, accounts payable of $190, and inventory in the amount of $170. The bank is considering making them a short-term loan, but believes that their inventory is worthless. For every $1 in loans coming due this upcoming year, how much money does the bank anticipate Jesica's Boutique will receive from converting current assets into cash?

Choices:

.89

1.51

2.13

.62

.35

If possible, please explain method. We have virtually no instruction in this course.

Explanation / Answer

Answer:

Quick ratio = Cash and cash equivalents / Current liabilities

= (Cash + Accounts Receivables) / Accounts Payable

= (51 + 66) /190

=0.62

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