Use the table for the question(s)below.
Consider the following balance sheet:

-Luther Corporation's cash ratio for 2012 is closest to:
A)1.19
B)10.6
C)0.44
D)0.41

Question

Use the table for the question(s)below.
Consider the following balance sheet:
  
-Luther Corporation's cash ratio for 2012 is closest to:
A)1.19 
B)10.6 
C)0.44 
D)0.41

Quizplus · Accepted Answer

The cash ratio is calculated as follows:
Cash Ratio = (Cash + Short-term Investments) / Current Liabilities
From the balance sheet, we can see that the cash and short-term investments for Luther Corporation in 2012 is $18,800,000. The current liabilities are $42,700,000. 
Therefore, Cash Ratio = 18,800,000 / 42,700,000 = 0.44 (rounded to two decimal places). 
Thus, the closest answer choice is C) 0.44.

Use the Table for the Question(s)below