A Florida GC has $72,000 cash, $318,000 receivables, $44,000 marketable securities, $126,000 inventory, and $455,000 current liabilities. What quick ratio should be reported?
Correct Answer
A) 0.95 to 1
Quick assets are cash, receivables, and marketable securities, totaling $434,000. Dividing by $455,000 gives about 0.95.
Why This Is the Correct Answer
Quick assets are cash, receivables, and marketable securities, totaling $434,000. Dividing by $455,000 gives about 0.95.
Why the Other Options Are Wrong
Option B: 0.86 to 1
0.86 to 1 is below the supported result for quick ratio; it likely uses the wrong base, period, or account bucket.
Option C: 1.23 to 1
1.23 to 1 is above the supported result for quick ratio; it likely adds an unsupported amount or compares the wrong financial base.
Option D: 0.70 to 1
0.70 to 1 is below the supported result for quick ratio; it likely uses the wrong base, period, or account bucket.
Memory Technique
Quick Ratio drawer for Bonding Agent: label assets before counting dollars.
Reference Hint
Open-book path: tab Builder's Guide to Accounting, 2001 to Section Three, Financial Ratios, Balance Sheet Ratios; use the job ledger figures in the stem and recompute the same accounting measure.
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