Question

From the following compute current ratio and quick ratio: Fixed Assets 100000 Inventory a Debtors 30000 20,000 Cash 40,000 o Prepaid expenses Creditors 10,000 30,000 Reserves 10,000

Answer 1

Answer:

Current Ratio = current assets /current liability

Current assets = inventory + debtors+ cash + prepaid expenses

= 30000 + 20000+40000+10000

= 100000

current liabilities = creditors = 30000

so Ratio = 100000/30000= 3.33:1

Quick Ratio = Quick assets / current liability

Quick assets = Current Assets - inventory - prepaid expenses

= 100000-30000-10000

= 60000

So Ratio = 60000/30000= 2:1