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16 October, 05:44

The Golden Braid Bookstore has a quick ratio (Acid Test) of 4.75:1, $40,000 in accounts receivable, and liabilities totaling $80,000. How much cash do they have?

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  1. 16 October, 08:55
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    Golden Braid Bookstore has $340,000 in cash

    Explanation:

    Quick ratio=current assets-inventory/current liabilities

    Based on the information provided in this question, the quick ratio can be modified (no inventory, cash and accounts receivables are the only current assets)

    quick ratio=accounts receivables+cash/current liabilities

    quick ratio is 4.75/1

    accounts receivables is $40,000

    cash is unknown, taken as C

    current liabilities is $80,000

    4.75=$40,000+C/$80,000

    By cross multiplication

    4.75*$80,000=$40,000+C

    C = (4.75*$80,000) - $40,000

    C=$380,000-$40,000

    C=$340,000
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