You have the following information about a company: quick ratio = 0.85, inventory = $125,000 and current assets = $375,000. What is the company's current ratio?

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Quizplus · Accepted Answer

The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities. Given the quick ratio is 0.85, we can set up the equation: (375,000 - 125,000) / Current Liabilities = 0.85. Solving for Current Liabilities gives us $294,118. The current ratio is Current Assets / Current Liabilities = 375,000 / 294,118 ≈ 1.28.

You Have the Following Information About a Company: Quick Ratio