Velour Company has a current ratio of 3.5 and an acid-test ratio of 3.0. The com

Question

Velour Company has a current ratio of 3.5 and an acid-test ratio of 3.0. The company's current assets consist of cash, marketable securities, accounts receivable, and inventory. The company's inventory is $45,000. Velour Company's current liabilities must be: (Round your intermediate calculations to 1 decimal place.)

Velour Company has a current ratio of 3.5 and an acid-test ratio of 3.0. The company's current assets consist of cash, marketable securities, accounts receivable, and inventory. The company's inventory is $45,000. Velour Company's current liabilities must be: (Round your intermediate calculations to 1 decimal place.)

Explanation / Answer

Current Ratio= Current Asset/Current Liabilty

3.5 = CA/CL

CL = CA/3.5

Acid Test Ratio =Qick Asset/Current Liabilty

3 = (CA-Inventory)/(CA/3.5)

3*CA/3.5 = CA-45000

0.8571CA =CA-45000

CA= 45000/0.1429 = $315000

CL= 315000/3.5 = $90000

Therefore,Current Liabilty = $90,000

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