If you have a total assets of 100 and 25% is inventory, what is the Quick ratio if current liability is 100?Select one:a.2.00b.0.75c.1.25d.0.25
Question
If you have a total assets of 100 and 25% is inventory, what is the Quick ratio if current liability is 100?
Select one:
- a. 2.00
- b. 0.75
- c. 1.25
- d. 0.25
Solution
The Quick Ratio, also known as the Acid-Test Ratio, is a liquidity ratio that measures the ability of a company to pay off its current liabilities without relying on the sale of inventory. It is calculated as follows:
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
Given in the problem:
Total Assets = 100 Inventory = 25% of Total Assets = 25% * 100 = 25 Current Liabilities = 100
Substituting these values into the formula:
Quick Ratio = (100 - 25) / 100 = 0.75
So, the answer is b. 0.75.
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