Total current assets for Z- Pack Company at the end of 2016 were $3,550,100. Tot

Question

Total current assets for Z- Pack Company at the end of 2016 were $3,550,100. Total cash and accounts receivable included in current assets were $2,100,000. The company's current liabilities were $1,980,312. Company's in the same business as Z- Pack had Quick Ratio's of .75. Is Z-Pack's Quick Ratio higher and or lower and what does that imply about its ability to cover its current obligations at the end of 2016?

Z-Pack's Quick Ratio is higher and appears to have more liquidity than its peer group to satisfy its current liabilities.

Z-Pack's Quick Ratio is lower and appears to have less liquidity than its peer group to satisfy its current liabilities.

Z-Pack's Quick Ratio is approximately the same as its peer group and therefore it has about the same level of liquidity relative to its current liabilities as its peer group.

Answer cannot be determined from info provided.

Z-Pack's Quick Ratio is higher and appears to have more liquidity than its peer group to satisfy its current liabilities.

Explanation / Answer

Answer) option 1

It appears that the quick ratio for Z-Pack is higher than it peers.Hence it has more liquidity than its peers.

This is because

Total cash & receivable = 2100000

Total current asset = 3550100

quick ratio = Cash and receivables / current liability = 2100000/198012 = 1.06

Quick ratio is a more stringent measure of liquidity as it deos not inclue inventory

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