Numbers to use- Pellegrini Southern Inc.\'s current ratio is , and its quick rat
ID: 2813294 • Letter: N
Question
Numbers to use-
Pellegrini Southern Inc.'s current ratio is , and its quick ratio is ; Scramouche Opera Company's current ratio is , and its quick ratio is Note: Round your values to four decimal places. Which of the following statements are true? Check all that apply. D Scramouche Opera Company has a better ability to meet its short-term liabilities than Pellegrini Southern Inc. D If a company has a quick ratio of less than 1 but a current ratio of more than 1 and if the difference between the two ratios is D Compared to Pellegrini Southern Inc, Scramouche Opera Company has less liquldity and a lower reliance on outside cash flow to If a company's current liabilities are increasing faster than its current assets, the company's liquidity position is weakening. large, then the company depends heavily on the sale of its inventory to meet its short-term obligations finance its short-term obligations. An increase in the current ratio over time always means that the company's liquidity position is improving
Explanation / Answer
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = [Current Assets - Inventory] / Current Liabilities
Pellegrini Southern Inc. :
Current Ratio = $3,600 / $2,700 = 1.33
Quick Ratio = [$3,600 - $1,584] / $2,700 = 0.75
Scramouche Opera Company :
Current Ratio = $5,600 / $3,375 = 1.66
Quick Ratio = [$5,600 - $2,464] / $3,375 = 0.93
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