The following is a partial list of account balances from the books of Probst Enterprise at the end of 2010: $$\begin{array} { l r }
\text { Accounts payable } & \$ 20,500 \
\text { Accounts receivable } & 12,300 \
\text { Accrued interest on short-term note } & 1,200 \
\text { Cash } & 6,500 \
\text { Wages payable } & 1,300 \
\text { Income taxes payable } & 1,900 \
\text { Inventory } & 10,000
\end{array}$$ Based solely upon these balances,what is the quick ratio?
A)0.76
B)1.15
C)0.26
D)0.79

Question

The following is a partial list of account balances from the books of Probst Enterprise at the end of 2010: $$\begin{array} { l r } 
\text { Accounts payable } & \$ 20,500 \
\text { Accounts receivable } & 12,300 \
\text { Accrued interest on short-term note } & 1,200 \
\text { Cash } & 6,500 \
\text { Wages payable } & 1,300 \
\text { Income taxes payable } & 1,900 \
\text { Inventory } & 10,000
\end{array}$$ Based solely upon these balances,what is the quick ratio?
A)0.76
B)1.15
C)0.26
D)0.79

Quizplus · Accepted Answer

The quick ratio is calculated as (Cash + Accounts Receivable) / Current Liabilities. Here, quick assets are $6,500 (Cash) + $12,300 (Accounts Receivable) = $18,800. Current liabilities are $20,500 (Accounts Payable) + $1,200 (Accrued Interest) + $1,300 (Wages Payable) + $1,900 (Income Taxes Payable) = $24,900. Quick ratio = $18,800 / $24,900 = 0.76.

The Following Is a Partial List of Account Balances from the Books