For the FY 2016, Alpha Company’s balance sheet included the following current items: cash $50,000, accounts receivable $170,000, inventories $100,000, prepaid expenses $25,000, accounts payable $90,000, and accrued expenses $70,000. Use this information to determine the: (Round & enter your answers to one decimal place for non-dollar ratios and enter the value. For dollar ratio enter as whole dollars only.)
1. Quick Ratio
2. Current Ratio
2. Working Capita
Expert Answer
Total current assets=(Cash+AR+Inventories+Prepaid expenses)
=($50,000+$170,000+$100,000+$25000)=$345000
Total current liabilities=(Accounts payable+Accrued expenses)
=($90,000+$70,000)=$160,000
2.Current ratio=Current assets/Current liabilities
=($345000-$160,000)=2.15625.
=2.2(Approx).
3.Working capital=Current assets-Current liabilities
=($345000-$160,000)=$185000
1.Quick ratio=(Current assets-Inventory-Prepaid expenses)/Current liabilities
=($345000-100,000-25000)/160,000
=1.375.
=1.4(Approx).