Earth’s Best Company has sales of $200,000, Cost of Goods Sold of 100,000, a net

Question

Earth’s Best Company has sales of $200,000, Cost of Goods Sold of 100,000, a net income of $15,000, and the following balance sheet:

Cash                           $ 10,000            Accounts payable                     $ 30,000

Receivables                    50,000            Other current liabilities                20,000

Inventories                    150,000            Long-term debt                           50,000

Net fixed assets              90,000            Common equity                       200,000

Total assets                $300,000            Total liabilities and equity        $300,000

Calculate the firm’s Quick Ratio?

A. 1.67

B. 0.33

C. 1.2

D. 0.83

Explanation / Answer

Quick Ratio = Liquid Assets / Current Liabilities

Liquid Assets(current assets other than inventory) = $10000 + $50000 = $60000

Current Liabilities = $30000 + $20000 = $50000

Quick Ratio = 60000 / 50000 = 1.2

C option is correct

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.