The data of Graham Brothers Company for two years are given below. Based on the above information,which of the following statements is TRUE?
A)Cash ratio has increased from 0.02 in 2018 to 0.03 in 2019.
B)Cash ratio has increased from 0.05 in 2018 to 0.08 in 2019.
C)Cash ratio has increased from 0.387 in 2018 to 0.221 in 2019.
D)Cash ratio has increased from 0.221 in 2018 to 0.387 in 2019.

Question

The data of Graham Brothers Company for two years are given below.  Based on the above information,which of the following statements is TRUE?
A)Cash ratio has increased from 0.02 in 2018 to 0.03 in 2019. 
B)Cash ratio has increased from 0.05 in 2018 to 0.08 in 2019. 
C)Cash ratio has increased from 0.387 in 2018 to 0.221 in 2019. 
D)Cash ratio has increased from 0.221 in 2018 to 0.387 in 2019.

Quizplus · Accepted Answer

D)Calculation of cash ratios:
Cash Ratio = (Cash + Cash Equivalents)/Total Current Liabilities
2019: Cash Ratio = $12,000 / $31,000 = 0.387
2018: Cash Ratio = $5,300 / $24,000 = 0.221
A higher cash ratio is usually considered favorable as the company is said to be in a better position to pay off its current liabilities.

The Data of Graham Brothers Company for Two Years Are