Pasky Company has the following financial data on January 1, 2017 and January 1, 2016.
$$\begin{array} { l r r r }
& 1 / 1 / 17 & 1 / 1 / 16 \
\hline \text { Cash } & \$ 35,000 & \$ 71,000 \
\text { Accounts receivable } & 69,000 & 33,000 \
\text { Marketable securities } & 9 , 0 0 0 & 3 0 , 0 0 0 \
\text { Inventary } & 8 7 , 0 0 0 & 105,000 \
\text { Net plant and equipment } & 120,000 & 9 6 , 0 0 0 \
& & \
\text { Current liabilities } & \$ 42,000 & \$ 71,000 \
\text { Lang-term debt } & 147,000 &9 0 , 0 0 0 \
\text { Sharehalders' equity } & 131,000 & 174,000
\end{array}$$
In terms of the quick and current ratio, which of the following statements is true?
A)Pasky's short-term solvency position has improved.
B)Pasky's short-term solvency position has declined.
C)Pasky's short-term solvency position has remained the same
D)Pasky's quick ratio is increasing, but its current ratio is decreasing.

Question

Pasky Company has the following financial data on January 1, 2017 and January 1, 2016.
$$\begin{array} { l r r r } 
& 1 / 1 / 17 & 1 / 1 / 16 \
\hline \text { Cash } & \$ 35,000 & \$ 71,000 \
\text { Accounts receivable } & 69,000 & 33,000 \
\text { Marketable securities } &  9 , 0 0 0  & 3 0 , 0 0 0  \
\text { Inventary } & 8 7 , 0 0 0  & 105,000 \
\text { Net plant and equipment } & 120,000 & 9 6 , 0 0 0  \
& & \
\text { Current liabilities } & \$ 42,000 & \$ 71,000 \
\text { Lang-term debt } & 147,000 &9 0 , 0 0 0  \
\text { Sharehalders' equity } & 131,000 & 174,000
\end{array}$$
In terms of the quick and current ratio, which of the following statements is true?
A)Pasky's short-term solvency position has improved.
B)Pasky's short-term solvency position has declined.
C)Pasky's short-term solvency position has remained the same
D)Pasky's quick ratio is increasing, but its current ratio is decreasing.

Quizplus · Accepted Answer

Both the quick ratio and current ratio have increased from 2016 to 2017, indicating that Pasky's short-term solvency position has improved. The quick ratio has increased from 0.86 to 1.00, which means that Pasky is now able to cover its current liabilities with a greater portion of its liquid assets. The current ratio has increased from 1.44 to 1.75, indicating that Pasky's current assets can now cover its current liabilities more easily.

Pasky Company Has the Following Financial Data on January 1