Ask Question
BusinessBusiness
16 July, 01:33

A company has current assets of $90,000 (of which $40,000 is inventory and prepaid items) and current liabilities of $40,000. What is the current ratio? What is the acid-test ratio? If the company borrows $15,000 cash from a bank on a 120-day loan, what will its current ratio be? What will the acid-test ratio be? (R

+3
Answers (1)
  1. 16 July, 02:02
    0
    Current ratio = 2.25

    Acid test ratio = 1.25

    After Taking Loan

    Current ratio = 1.64

    Acid test ratio = 0.91

    Explanation:

    Current Ratio is the comparison of company's short term assets and short term liabilities to see if the company is able to pay its short term liabilities.

    Current Ratio = Current Assets / Current Liabilities = $90,000 / $40,000 = 2.25 times

    The company can pay 2.25 time the current liabilities from its current assets.

    Asset test ratio compares company's most short term assets with most short term liabilities to check that if company is able to pay all the immediate liabilities it become due.

    Acid Test ratio = (90,000 - 40,000) / 40,000 = 1.25

    After taking the bank loan

    Total current Liabilities = $15,000 + 40,000 = $55,000

    Current ratio = $90,000 / $55000 = 1.64

    Acid test ratio = $50,000 / $55000 = 0.91
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “A company has current assets of $90,000 (of which $40,000 is inventory and prepaid items) and current liabilities of $40,000. What is the ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers
You Might be Interested in
Revenues are:Select one:a. The same as net income. b. The excess of expenses over assets. c. Resources owned or controlled by a companyd. The gross increase in equity from a company's earning activities. e. The costs of assets or services used.
Answers (1)
Which are examples of sole proprietorships? Check all that apply. lawyers working for a corporation doctors in a partnership independent workers franchise restaurants in a partnership tax preparer working his own business freelance writers
Answers (1)
Earlier this year, a client of yours wrote a letter to the firm, requesting that his mail be held for 2 months, which your firm did. Later in the year, the customer writes another letter, asking that the mail be held for another 3 months.
Answers (1)
What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies on a balance sheet? As trade notes and accounts receivable if they otherwise qualify as current assets.
Answers (1)
You are going to the movie theater with your grandparents and your younger brother. Senior citizen tickets cost $6, your ticket cost $6.25 and your brothers cost $4.25.
Answers (1)
New Questions in Business
Florida law requires that motorcycles must always be operated by
Answers (2)
Helena Fogarty does her own research and development for Mi Ola. When she goes out and talks to fellow surfers about their use and likes and dislikes of surfing swimwear in general to get inspiration for new products, she is in which of the
Answers (1)
Amanda invested a total of $3 comma 100 into three separate accounts that pay 4 % , 6 % and 7 % annual interest. Amanda has three times as much invested in the account that pays 7 % as she does in the account that pays 4 %.
Answers (1)
Mackery, Inc., has an outstanding issue of preferred stock that pays a $5.6 dividend every year. If this issue currently sells for $82.08 per share, what return to market investors require on it currently
Answers (1)
A researcher randomly assigns 50 students to two groups of 25. group 1 is given computers and educational software to take home and use, while group 2 is given educational workbooks to take home.
Answers (1)
Home » Business » A company has current assets of $90,000 (of which $40,000 is inventory and prepaid items) and current liabilities of $40,000.
Sign Up Forgot Password?