Liquidity Ratios You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: Cash and marketable securities = $200,000, Accounts receivable = $800,000, Inventory = $1,000,000, Accrued wages and taxes = $250,000, Accounts payable = $400,000, and Notes payable = $300,000. What are Blue Jays' Current ratio, Quick ratio, and Cash ratio, respectively?
A) 1.05263, 1.05263, 0.21053
B) 2.10526, 1.05263, 0.21053
C) 3.07692, 1.53846, 0.30769
D) 3.07692, 1.05263, 0.30769

Question

Quizplus · Accepted Answer

The current ratio is calculated as (Cash + Accounts Receivable + Inventory) / (Accrued Wages and Taxes + Accounts Payable + Notes Payable) = ($200,000 + $800,000 + $1,000,000) / ($250,000 + $400,000 + $300,000) = 2.10526. The quick ratio is (Cash + Accounts Receivable) / (Accrued Wages and Taxes + Accounts Payable + Notes Payable) = ($200,000 + $800,000) / ($250,000 + $400,000 + $300,000) = 1.05263. The cash ratio is Cash / (Accrued Wages and Taxes + Accounts Payable + Notes Payable) = $200,000 / ($250,000 + $400,000 + $300,000) = 0.21053.

Liquidity Ratios You Are Evaluating the Balance Sheet for Blue