Signal Hill Ltd.had the following accounts on their balance sheet: Cash $10,000, Accounts receivable $50,000, Inventory $45,000, Prepaid rent $2,500, Long-term receivable $12,000, Accounts payable $27,500, Interest payable $1,200, Current portion of long-term bank debt $50,000, and Long-term debt $100,000.What was their quick ratio?

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Quizplus · Accepted Answer

The quick ratio is calculated as (Cash + Accounts Receivable + Short-term Investments) / Current Liabilities. Here, it's ($10,000 + $50,000) / ($27,500 + $1,200 + $50,000) = $60,000 / $78,700 = 0.76. Inventory and Prepaid rent are not included in the quick ratio calculation.