The data of Franklin Brothers Corp. for two years are given below: $$\begin{array} { | l | c | r | }
\hline & 2014 & 2015 \
\hline \text { Cash and cash equivalents } & \$ 5,400 & \$ 12,500 \
\hline \text { Total current liabilities } & 24,000 & 30,000 \
\hline
\end{array}$$ Based on the above information, which of the following statements is true?
A) Cash ratio has increased from 0.02 in 2014 to 0.03 in 2015.
B) Cash ratio has increased from 0.05 in 2014 to 0.08 in 2015.
C) Cash ratio has increased from 0.417 in 2014 to 0.225 in 2015.
D) Cash ratio has increased from 0.225 in 2014 to 0.417 in 2015.

Question

The data of Franklin Brothers Corp. for two years are given below: $$\begin{array} { | l | c | r | } 
\hline & 2014 & 2015 \
\hline \text { Cash and cash equivalents } & \$ 5,400 & \$ 12,500 \
\hline \text { Total current liabilities } & 24,000 & 30,000 \
\hline
\end{array}$$ Based on the above information, which of the following statements is true?
A) Cash ratio has increased from 0.02 in 2014 to 0.03 in 2015.
B) Cash ratio has increased from 0.05 in 2014 to 0.08 in 2015.
C) Cash ratio has increased from 0.417 in 2014 to 0.225 in 2015.
D) Cash ratio has increased from 0.225 in 2014 to 0.417 in 2015.

Quizplus · Accepted Answer

Cash ratio = cash and cash equivalents / total current liabilities
Cash ratio in 2014 = 5,400 / 24,000 = 0.225
Cash ratio in 2015 = 12,500 / 30,000 = 0.417
Therefore, the cash ratio has increased from 0.225 in 2014 to 0.417 in 2015. Choice (D) is the correct answer.

The Data of Franklin Brothers Corp Based on the Above Information, Which of the Following Statements