Gremel Corporation has provided the following financial data: Current assets: Cash$241,000 Accounts receivable, net$234,000 Inventory$119,000 Prepaid expenses$45,000 Total current assets$639,000 Current liabilities: Accounts payable$163,000 Accrued liabilities$87,000 Notes payable, short term$57,000 Total current liabilities$307,000 Required:a. What is the company's working capital?b. What is the company's current ratio?c. What is the company's acid-test (quick) ratio?
What will be an ideal response?
a.
Working capital = Current assets - Current liabilities
= $639,000 - $307,000 = $332,000
b.
Current ratio = Current assets ÷ Current liabilities
= $639,000 ÷ $307,000 = 2.08 (rounded)
c.
Acid-test (quick) ratio = Quick assets* ÷ Current liabilities
= $475,000 ÷ $307,000 = 1.55 (rounded)
*Quick assets = Cash + Marketable securities + Current receivables
= $241,000 + $0 + $234,000 = $475,000
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