The top part of Rammy's Inc.'s 2013 balance sheet is listed as follows (in millions of dollars). $\begin{array}{lrcr}
\text { Current assets: } & & \text { Current liabilities: } \
\text { Cash and marketable } & &{\text { Accrued wages and }} & \
\text { securities } & \$ & \text { taxes } & \$ 6 \
\text { Accounts receivable } & 15 & \text { Accounts payable } & 10 \
\text { Inventory } & 95 & \text { Notes payable } & 50 \
\text { Total } & \$ 115 & \text { Total } & \$ 66
\end{array}$ What are Rammy's Inc.'s current ratio, quick ratio, and cash ratio for 2013?
A)1.74242, 0.30303, 0.07576
B)7.1875, 1.25, 0.3125
C)1.43939, 0.30303, 0.07576
D)19.16667, 3.33333, 0.83333

Question

Quizplus · Accepted Answer

The current ratio is calculated by dividing current assets by current liabilities. Rammy's Inc.'s current ratio is $115/$66 = 1.74242.The quick ratio is calculated by dividing liquid assets (cash and marketable securities) by current liabilities. Rammy's Inc.'s quick ratio is $15/$66 = 0.30303.The cash ratio is calculated by dividing cash by current liabilities. Rammy's Inc.'s cash ratio is $15/$66 = 0.07576.

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