A company has cash of $800, current liabilities of $500, and long-term liabilities of $600. If the cash ratio is 2.5, then marketable securities must be

Question

Quizplus · Accepted Answer

The cash ratio is calculated by dividing cash and marketable securities by current liabilities. We know that the cash ratio is 2.5, and we are given that the company has $800 in cash and $500 in current liabilities.

Cash ratio = (cash + marketable securities) / current liabilities
2.5 = ($800 + MS) / $500
MS = $450

Therefore, the marketable securities must be $450.

A Company Has Cash of $800, Current Liabilities of $500