Calculate the quick ratio from the following information of a manufacturing firm. Cash in hand = $200,000
Cash at bank = $100,000
Total current assets = $450,000
Accrued expenses = $100,000
Taxes payable = $100,000
A)3:2
B)1:2
C)3:1
D)4:1
E)2:2

Question

Quizplus · Accepted Answer

The quick ratio (also known as acid-test ratio) is calculated by dividing the sum of cash, marketable securities, and accounts receivable by current liabilities. In this case, we have:
Quick assets = cash in hand + cash at bank = $200,000 + $100,000 = $300,000
Current liabilities = accrued expenses + taxes payable = $100,000 + $100,000 = $200,000
Therefore, the quick ratio = Quick assets / Current liabilities = $300,000 / $200,000 = 3:2. Option A is the correct answer.

Calculate the Quick Ratio from the Following Information of a Manufacturing