The data of Graham Brothers Company for two years are given below. $$\begin{array} { | l | r | r | }
\hline & 2018 & 2019 \
\hline \text { Cash and cash } & & \
\text { equivalents } & \$ 5,300 & \$ 12,000 \
\hline \text { Total current liabilities } & 24,000 & 31,000 \
\hline
\end{array}$$ Based on the above information,which of the following statements is TRUE?
A) Cash ratio has increased from 0.02 in 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. $$\begin{array} { | l | r | r | } 
\hline & 2018 & 2019 \
\hline \text { Cash and cash } & & \
\text { equivalents } & \$ 5,300 & \$ 12,000 \
\hline \text { Total current liabilities } & 24,000 & 31,000 \
\hline
\end{array}$$ Based on the above information,which of the following statements is TRUE?
A) Cash ratio has increased from 0.02 in 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

The cash ratio is calculated as cash and cash equivalents divided by total current liabilities. For 2018, it is 5300/24000 = 0.221, and for 2019, it is 12000/31000 = 0.387. Thus, the cash ratio increased from 0.221 in 2018 to 0.387 in 2019.

The Data of Graham Brothers Company for Two Years Are