Last year, Quayle Energy had sales of $200 million, and its inventory turnover ratio was 5.0. The company's current assets totaled $100 million, and its current ratio was 1.2. What was the company's quick ratio?

Question

Quizplus · Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. First, find the inventory: Inventory = Sales / Inventory Turnover = $200 million / 5 = $40 million. Current Liabilities = Current Assets / Current Ratio = $100 million / 1.2 = $83.33 million. Quick Ratio = ($100 million - $40 million) / $83.33 million = $60 million / $83.33 million ≈ 0.72.

Last Year, Quayle Energy Had Sales of $200 Million, and Its