Computing and analyzing acid-test and current ratios

Case X Case Y Case Z
Cash $1,800 $120 $1,000
Short-term investments 0 0 400
Current receivables 150 400 400
Inventory 1,900 1,800 2,500
Prepaid expenses 200 500 900
Total current assets $4,050 $2,820 $5,200
Current liabilities $2,000 $1,210 $3,000

Required:
Compute the current ratio and acid-test ratio for each of the above separate cases. Round your answers to 2 decimal places.

Current ratio- 2.03  2.33  1.73 and Acid-test ratio- 0.98  0.43  0.60              

Explanation:

Attach is the table of given cases

Acid test ratio=

Now, solving for acid test ratio.

Case x

⇒ Acid test ratio=

⇒ Acid test ratio=

∴ Acid test ratio=

Case y

⇒ Acid test ratio=

⇒ Acid test ratio=

∴ Acid test ratio=

Case Z

⇒ Acid test ratio=

⇒ Acid test ratio=

∴ Acid test ratio=

Next solving for current ratio.

We know, current ratio=

Case x

⇒ current ratio=

∴ current ratio=

Case y

⇒ current ratio=

∴ current ratio=

Case Z

⇒ current ratio=

∴ current ratio=

Hence, Current ratio- 2.03  2.33  1.73 and Acid-test ratio- 0.98  0.43  0.60              

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