Pritchett Company reported the following year-end data:   Cash $ 15,000 Short-term investments 5,000 Accounts receivable (current) 8,000 Inventory 20,000 Prepaid (current) assets 6,000 Total current liabilities 20,000 Compute the (a) current ratio and (b) acid-test ratio. Compute the current ratio.

Managerial Accounting: The Cornerstone of Business Decision-Making
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Chapter15: Financial Statement Analysis
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Problem 6MCQ
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Pritchett Company reported the following year-end data:
 

Cash $ 15,000
Short-term investments 5,000
Accounts receivable (current) 8,000
Inventory 20,000
Prepaid (current) assets 6,000
Total current liabilities 20,000


Compute the (a) current ratio and (b) acid-test ratio.

Compute the current ratio.

 
 
 
 
Current Ratio
Numerator: / Denominator: = Current Ratio
  /   = Current ratio
  /   =   to 1

 

Compute the acid-test ratio.

 
 
 
 
Acid-Test Ratio
Numerator: / Denominator: = Acid-Test Ratio
  +   +   /   = Acid-test ratio
  +   +   /   =   to 1
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