Kiosk Corp. has current assets of $4.5 million and current liabilities of $3.6 million. The current ratio is 1.25, and the quick ratio is 0.75. How much does Kiosk have invested in inventory (in millions)?
A) $0.8
B) $1.8
C) $2.4
D) $2.9
E) $3.6

Question

Quizplus · Accepted Answer

Current ratio = Current assets / Current liabilities
1.25 = 4.5 million / Current liabilities
Current liabilities = 3.6 million

Quick ratio = (Current assets - Inventory) / Current liabilities
0.75 = (4.5 million - Inventory) / 3.6 million
4.5 million - Inventory = 2.7 million
Inventory = 1.8 million

Therefore, Kiosk Corp. has invested $1.8 million in inventory. The correct answer is B.