Draw a conclusion regarding this company\'s liquidity BALANCE SHEET current asse

Question

Draw a conclusion regarding this company's liquidity

BALANCE SHEET current assets cash & marketable securities accounts receivable inventories 50,000.0 10,000.0 15,000.0 75,000.0 Total Current Assets Property, Plant, & Equipment Gross Fixed Assets (at original cost) LESS: Acccumulated Depreciation 150,000.0 (25,000.0) 125,000.0 Net Fixed Assets Goodwill & Intangibles Deferred Income Taxes Other Assets TOTALASSETS 200,000.0 current liabilities 6,000.0 12,000.0 Accounts Payable notes payable current portion of long-term debt accruals 2,000.0 20,000.0 80,000.0 Total Current Liabilities Long-term Debt Other Long-term Liabilities Total Liabiities 100,000.0 shareholder's equity Preferred Stock (Valued at Par) Common Stock (Valued at Par) Additional Paid-In Capital Retained Earnings 100.0 2,000.0 97,900.0 100,000.0 100,000.0 Total Shareholder's Equity common shareholder's equity

Explanation / Answer

Since the liquidity indicators such as Current ratio & Quick Ratio are much greater than 1 and the company has large piles of cash, its liquidity position is very good.

Current Assets Current liabilities Cash & Marketable securities 50000 Accounts payable 6000 Accounts receivable 10000 Notes payable 12000 Inventories 15000 Current portion of long term debt 2000 Total Current Assets 75000 Total Current Liabilites 20000 Current Ratio = Current Assets/Current Liabilities Current Ratio = 3.75 Quick Ratio = (Cash & Marketable securities + Accounts receivables) / Current Liabilities Quick Ratio = 3.00

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