Assume the following data: Current assets = 500; Current liabilities = 250; Inventory = 200; Account receivables = 200.Calculate the cash ratio.(Assume that the firm has no marketable securities.)
A)0.4
B)2
C)1.5
D)1.2

Question

Quizplus · Accepted Answer

Cash Ratio = (Cash + Marketable Securities) / Current Liabilities
As per the assumption in the question, there are no marketable securities. Therefore, Cash Ratio = Cash / Current Liabilities
Cash = Current Assets - Inventory - Account Receivables
= 500 - 200 - 200
= 100
Cash Ratio = 100/250
= 0.4

Assume the Following Data: Current Assets = 500; Current Liabilities