You are evaluating the balance sheet for PattyCake’s Corporation. From the balan

Question

You are evaluating the balance sheet for PattyCake’s Corporation. From the balance sheet you find the following balances: cash and marketable securities = $420,000; accounts receivable = $1,160,000; inventory = $2,060,000; accrued wages and taxes = $480,000; accounts payable = $780,000; and notes payable = $560,000.

Calculate PattyCakes’ current ratio. (Round your answer to 2 decimal places.)

Current ratio times

Calculate PattyCakes’ quick ratio. (Round your answer to 2 decimal places.)

Quick ratio times

Calculate PattyCakes’ cash ratio. (Round your answer to 2 decimal places.)

Cash ratio times

Explanation / Answer

Current Assets: Cash and marketable securities           4,20,000 Accounts Receivable        11,60,000 Inventory        20,60,000 Total Current Assets        36,40,000 Current Liabilites: Accrued wages and taxes           4,80,000 Accounts payable           7,80,000 Notes Payable           5,60,000 Total Current Liabilities        18,20,000 Current ratio = Current Assets / Current Liabilities Current ratio = 3,640,000/1,820,000 Current ratio times = 2 times Quick ratio = Quick Assets / Current Liabilities Quick ratio = (3,640,000-2,060,000)/1,820,000 Quick ratio times = 0.87 times Cash ratio = Cash and Cash equivalents / Current Liabilities Cash ratio = 420,000/1,820,000 Cash ratio times = 0.23 times

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