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 Current Assets / Current Liabilities. Here, Current Assets = $200,000 (cash and marketable securities) + $800,000 (accounts receivable) + $1,000,000 (inventory) = $2,000,000. Current Liabilities = $250,000 (accrued wages and taxes) + $400,000 (accounts payable) + $300,000 (notes payable) = $950,000. So, the current ratio = $2,000,000 / $950,000 = 2.10526. The quick ratio is calculated as (Current Assets - Inventory) / Current Liabilities = ($2,000,000 - $1,000,000) / $950,000 = $1,000,000 / $950,000 = 1.05263. The cash ratio is calculated as (Cash and Marketable Securities) / Current Liabilities = $200,000 / $950,000 = 0.21053.

You Are Evaluating the Balance Sheet for Blue Jays Corporation