Question

Using the following year-end information for Calvin's Clothing, Inc., calculate the current ratio and acid-test ratio for the business: Cash $ 57,660 Short-term investments 13,500 Accounts receivable 57,000 Inventory 260,000 Prepaid expenses 8,850 Accounts payable 107,500 Other current payables 31,800

Answer 1

Current Ratio = Current Assets / Current Liabilities = $397,010 / $139,300 = 2.85

Acid-test ratio = Quick Assets/Current Liabilities = $128,160 / $139,300 = 0.92