You are evaluating the balance sheet for PattyCake’s Corporation. From the balan
ID: 1174707 • Letter: Y
Question
You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $330,000; accounts receivable = $1,320,000; inventory = $2,220,000; accrued wages and taxes = $560,000; accounts payable = $860,000; and notes payable = $720,000.
You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $330,000; accounts receivable = $1,320,000; inventory = $2,220,000; accrued wages and taxes = $560,000; accounts payable = $860,000; and notes payable = $720,000.
Explanation / Answer
a)
current ratio = current asset /current liabilities
= 3870000/2140000
= 1.81
B)Quick ratio = [current asset - Inventory ] / current liabilities
= [= 3870000 - 2220000] /2140000
= .77
c) cash ratio = cash and marketable securities / current liabilities
= 330000/2140000
= .15 times
cash and marketable securities 330000 accounts receivable 1320000 inventory 2220000 Total asset 3870000 accrued wages and taxes 560000 accounts payable 860000 notes payable 720000 Total current liabilities 2140000