Prepare a vertical analysis. Round percents to the nearest tenth of a percent.
-Current assets: $407,000 Current liabilities: $189,000
Liquid assets: $149,000
A)Current ratio = 2.15 which is fine
Acid-test ratio = 0.79 which is too low
B)Current ratio = 2.73 which is fine
Acid-test ratio = 0.79 which is too low
C)Current ratio = 2.15 which is fine
Acid-test ratio = 2.73 which is fine
D)Current ratio = 0.79 which is too low
Acid-test ratio = 2.15 which is fine

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities, which is $407,000 / $189,000 = 2.15. The acid-test ratio (quick ratio) is calculated as (current assets - inventory) / current liabilities. Since inventory is not provided, assuming liquid assets are current assets minus inventory, the acid-test ratio is $149,000 / $189,000 = 0.79.

Prepare a Vertical Analysis