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blsea
16 days ago
15

Parker Lane Cafe currently has $160,000 in cash, $380,000 in inventory, and $40,000 in accounts receivable. The company also has

$40,000 in accounts payable, and $10,000 in other current liabilities. What is its quick ratio?
a. 11.6: 1
b. 4: 1
c. 3.2: 1
Business
1 answer:
Free_Kalibri [3.1K]16 days ago
3 0

Answer:

The quick ratio for Parker Lane Cafe is b. 4: 1

Explanation:

The quick ratio serves as a measure of a firm's liquidity, reflecting its capacity to settle current obligations without having to liquidate inventory or seek new financing. It is computed using this formula:

Quick ratio = (Cash & equivalents + Short Term investments + Accounts receivable)/Current Liabilities

Parker Lane Cafe holds $160,000 in cash along with $40,000 in accounts receivable. Its current liabilities consist of $40,000 in accounts payable and $10,000 in other liabilities

Total Current Liabilities for the cafe = $40,000 + $10,000 = $50,000

Quick ratio = ($160,000 + $40,000)/$50,000 = $200,000/$50,000 = 4:1

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