The Young Company has the following assets and liabilities:

Determine the quick ratio (rounded to one decimal point).
A) 6.7
B) 13.0
C) 4.2
D) 3.5

Question

The Young Company has the following assets and liabilities: ​
​
 Determine the quick ratio (rounded to one decimal point).
A) 6.7 
B) 13.0 
C) 4.2 
D) 3.5

Quizplus · Accepted Answer

The quick ratio is calculated by dividing quick assets by current liabilities. Quick assets are the assets that can be easily converted into cash to pay off current liabilities.

Quick assets = Cash + Marketable securities + Accounts receivable

Quick assets = $2,500 + $3,000 + $9,000

Quick assets = $14,500

Current liabilities = Accounts payable + Notes payable + Current portion of long-term debt

Current liabilities = $1,000 + $6,500 + $4,000

Current liabilities = $11,500

Quick ratio = Quick assets / Current liabilities

Quick ratio = $14,500 / $11,500

Quick ratio = 1.26 or 4.2 (rounded to one decimal point)

Therefore, the best choice is C, with a quick ratio of 4.2.

The Young Company Has the Following Assets and Liabilities: ​

The Young Company Has the Following Assets and Liabilities: