Assume the following data: Current assets = 500; Current liabilities = 250; Inventory = 200; Accounts receivable = 200. Calculate the cash ratio. (Assume that the firm has no marketable securities.)
A)0.4
B)2.0
C)1.5
D)1.2

Question

Quizplus · Accepted Answer

The cash ratio is calculated as (Cash + Marketable Securities) / Current Liabilities. Given no marketable securities and assuming the difference between current assets and the sum of inventory and accounts receivable is cash, we have: Cash = 500 - (200 + 200) = 100. Thus, Cash Ratio = 100 / 250 = 0.4.

Assume the Following Data: Current Assets = 500; Current Liabilities