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 has Kiosk invested in inventory (in millions)?
A)$0.8
B)$1.8
C)$2.4
D)$2.9

Question

Quizplus · Accepted Answer

The current ratio is calculated as current assets divided by current liabilities. Given that the current ratio is 1.25, we can confirm the given current assets and liabilities are correct because $4.5 million / $3.6 million = 1.25. The quick ratio is calculated as (current assets - inventory) / current liabilities. Given the quick ratio is 0.75, we can set up the equation ($4.5 million - inventory) / $3.6 million = 0.75. Solving for inventory gives us $2.7 million - inventory = $2.7 million, so inventory = $4.5 million - $2.7 million = $1.8 million.