Williams Inc.has a current ratio equal to 3,a quick ratio equal to 1.8,and total current assets of $6 million.Williams' inventory balance is
A) $2,000,000.
B) $2,400,000.
C) $4,000,000.
D) $4,800,000.

Question

Quizplus · Accepted Answer

Quick ratio = (Current assets - Inventory)/Current liabilities
1.8 = (6 million - Inventory)/Current liabilities

Current ratio = Current assets/Current liabilities
3 = 6 million/Current liabilities

Solving the above two equations, we get:

Current liabilities = 2 million

Inventory = Current assets - Quick assets
Inventory = 6 million - (1.8 * 2 million) = $2,400,000

Therefore, the inventory balance for Williams Inc. is $2,400,000.