Greenacres Ltd has a quick ratio of 1.5:1 with total current liabilities of $50 000.If Greenacres Ltd has inventory of $25 000,the total current assets is:
A) $25 000
B) $75 000
C) $100 000
D) $50 000

Question

Quizplus · Accepted Answer

The quick ratio of 1.5:1 means that for every $1 of current liabilities, Greenacres Ltd has $1.5 of quick assets (current assets excluding inventory).

We know that the total current liabilities are $50,000. Therefore, the quick assets must be 1.5 times the current liabilities, which is $75,000.

Adding the inventory of $25,000 to the quick assets gives us the total current assets:

$75,000 (quick assets) + $25,000 (inventory) = $100,000

Therefore, the total current assets of Greenacres Ltd is $100,000, which is option C.

Greenacres Ltd Has a Quick Ratio of 1