The Golden Braid Bookstore currently has $340,000 in cash, $280,000 in inventory, and $40,000 in accounts receivable. The company also has $65,000 in accounts payable, and $15,000 in other current liabilities. What is its quick ratio?

Accepted Solution

Answer:The quick ratio is 4.75:1.Step-by-step explanation:From the given information it is clear that:Cash = $340,000Inventory = $280,000Accounts receivable = Β $40,000Accounts payable = $65000Other current liabilities = $15000Formula for quick ratio:[tex]\text{Quick ratio}=\frac{\text{Cash + Current receivables + short-term investment}}{\text{Current Liabilities}}[/tex]Substitute Cash = 340000, Current receivables=40000, Current Liabilities= (65000+15000).[tex]\text{Quick ratio}=\frac{340000+40000}{65000+15000}[/tex][tex]\text{Quick ratio}=4.75[/tex]Therefore the quick ratio is 4.75:1.