What would be considered quick assets out of
Cash& Short term investments......$47.3
receivables.........159.7
inventories...........72.3
prepaid expenses&other current assets...32.0
total current liabilities..........130.0
total liabilities............279.4
total stockholders equity............344.0
Compute quick assets and total current assets. How would you find quick ratio, current ratio and dollar amount of working capital.
To compute the quick assets and total current assets, you need to identify which of the given assets are considered as quick assets.
Quick assets, also known as liquid assets, are assets that can be easily converted into cash or used to pay off current liabilities. They typically include cash, short-term investments, and accounts receivable.
The assets that would be considered quick assets from the given information are:
Cash and short-term investments: $47.3
Receivables: $159.7
To compute quick assets, you simply add these two amounts together:
Quick Assets = Cash & Short-term investments + Receivables
= $47.3 + $159.7
= $207.0
Next, to compute the total current assets, you need to include all current assets listed:
Current Assets = Quick Assets + Inventories + Prepaid expenses & other current assets
= $207.0 + $72.3 + $32.0
= $311.3
Now, let's move on to calculating the ratios and dollar amount of working capital.
1. Quick Ratio:
The quick ratio measures a company's ability to meet its short-term obligations without relying on the sale of inventory. It is calculated as follows:
Quick Ratio = Quick Assets / Total Current Liabilities
= $207.0 / $130.0
= 1.59 (rounded to two decimal places)
2. Current Ratio:
The current ratio measures a company's overall liquidity and ability to pay off its short-term obligations. It is calculated as follows:
Current Ratio = Total Current Assets / Total Current Liabilities
= $311.3 / $130.0
= 2.39 (rounded to two decimal places)
3. Working Capital:
Working capital is the difference between a company's current assets and its current liabilities. It represents the funds available for day-to-day operations. It is calculated as follows:
Working Capital = Total Current Assets - Total Current Liabilities
= $311.3 - $130.0
= $181.3
So, the quick assets = $207.0, total current assets = $311.3, quick ratio = 1.59, current ratio = 2.39, and the dollar amount of working capital = $181.3.