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20 September, 21:08

You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: cash and marketable securities = $200,000, accounts receivable = $800,000, inventory = $1,000,000, accrued wages and taxes = $250,000, accounts payable = $400,000, and notes payable = $300,000. What are Blue Jays' current ratio, quick ratio, and cash ratio, respectively?

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  1. 20 September, 22:42
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    a. Current ratio=2.105

    b. Quick ratio=1.053

    c. Cash ratio=0.211

    Explanation:

    a.

    Step 1: Determine total current assets

    The total current assets can be expressed as;

    T=C+R+I

    where;

    T=total current assets

    C=cash and marketable securities

    R=accounts receivable

    I=inventory

    In our case;

    T=unknown, to be determined

    C=$200,000

    R=$800,000

    I=$1,000,000

    replacing;

    T = (200,000+800,000+1,000,000) = $2,000,000

    Total current assets=$2,000,000

    Step 2: Determine total current liabilities

    The total current liabilities can be expressed as;

    T=W+A+N

    where;

    T=total current liabilities

    W=accrued wages and taxes

    A=accounts payable

    N=notes payable

    In our case;

    T=unknown, to be determined

    W=$250,000

    A=$400,000

    N=$300,000

    replacing;

    T = (250,000+400,000+300,000) = $950,000

    Total current liabilities=$950,000

    Step 3: Determine current ratio

    The current ratio can be expressed as follows;

    Current ratio=total current assets/total current liabilities

    where;

    Current ratio=unknown, to be determined

    total current assets=$2,000,000

    total current liabilities=$950,000

    replacing;

    Current ratio = (2,000,000/950,000) = 2.105

    b.

    Step 4: Determine quick ratio

    The quick ratio can be expressed as follows;

    Quick ratio = (current assets-inventory) / current liabilities

    where;

    Quick ratio=unknown, to be determined

    current assets=$2,000,000

    inventory=$1,000,000

    current liabilities=$950,000

    replacing;

    Quick ratio = (2,000,000-1,000,000) / 950,000

    Quick ratio=1,000,000/950,000=1.053

    Quick ratio=1.053

    c.

    Step 4: Determine cash ratio

    The cash ratio can be expressed as follows;

    Cash ratio = (cash+marketable securities) / current liabilities

    where;

    Cash ratio=unknown, to be determined

    Cash and marketable securities=$200,000

    current liabilities=$950,000

    replacing;

    Cash ratio = (200,000/950,000) = 0.211

    Cash ratio=0.211
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Home » Business » You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: cash and marketable securities = $200,000, accounts receivable = $800,000, inventory = $1,000,000, accrued wages and taxes =
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