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QuestionSDJ, Inc. has net working capital \$2,630, current liabilities \$5,970, and inventory \$3,860. Find the current and quick ratios.

Studdy Solution

STEP 1

Assumptions1. The net working capital is \$,630. The current liabilities are \$5,9703. The inventory is \$3,860

STEP 2

First, we need to find the current assets. We can do this by adding the net working capital to the current liabilities.
Current assets=Net working capital+Current liabilitiesCurrent\, assets = Net\, working\, capital + Current\, liabilities

STEP 3

Now, plug in the given values for the net working capital and current liabilities to calculate the current assets.
Current assets=$2,630+$5,970Current\, assets = \$2,630 + \$5,970

STEP 4

Calculate the current assets.
Current assets=$2,630+$,970=$8,600Current\, assets = \$2,630 + \$,970 = \$8,600

STEP 5

Now that we have the current assets, we can find the current ratio. The current ratio is calculated by dividing the current assets by the current liabilities.
Current ratio=Current assets/Current liabilitiesCurrent\, ratio = Current\, assets / Current\, liabilities

STEP 6

Plug in the values for the current assets and the current liabilities to calculate the current ratio.
Current ratio=$8,600/$5,970Current\, ratio = \$8,600 / \$5,970

STEP 7

Calculate the current ratio.
Current ratio=$,600/$5,970=1.44 timesCurrent\, ratio = \$,600 / \$5,970 =1.44\, times

STEP 8

Now that we have the current ratio, we can find the quick ratio. The quick ratio is calculated by subtracting inventory from current assets and then dividing by current liabilities.
Quick ratio=(Current assets−Inventory)/Current liabilitiesQuick\, ratio = (Current\, assets - Inventory) / Current\, liabilities

STEP 9

Plug in the values for the current assets, inventory, and current liabilities to calculate the quick ratio.
Quick ratio=($8,600−$3,860)/$5,970Quick\, ratio = (\$8,600 - \$3,860) / \$5,970

STEP 10

Calculate the quick ratio.
Quick ratio=($8,600−$3,860)/$5,970=0.79 timesQuick\, ratio = (\$8,600 - \$3,860) / \$5,970 =0.79\, timesThe current ratio is.44 times and the quick ratio is0.79 times.

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