 # Question & Answer: Hannah Company has current assets equal to \$3,800,000. Of these, \$1,200,000 is cash, \$1,800,000 is ac…..

Hannah Company has current assets equal to \$3,800,000. Of these, \$1,200,000 is cash, \$1,800,000 is accounts receivable, \$500,000 is inventory, and the remainder is marketable securities. Current liabilities total \$1,908,000.

Required:

Don't use plagiarized sources. Get Your Custom Essay on
Question & Answer: Hannah Company has current assets equal to \$3,800,000. Of these, \$1,200,000 is cash, \$1,800,000 is ac…..
GET AN ESSAY WRITTEN FOR YOU FROM AS LOW AS \$13/PAGE

Note: Round answers to two decimal places.

1. Calculate the current ratio.

2. Calculate the quick ratio (acid-test ratio).

Current ratio = Current assets / Current liabilities

3800000 / 1908000 = 1.992 times

Quick ratio = Quick assets / Current liabilities

Quick assets =  Current assets – Inventory – Prepaid expenses

\$3,800,000 – \$500,000 – 0 = 33,00,000

Quick ratio = 33,00,000 / 1908000 = 1.73 times