To calculate and analyze the current and quick (acid-test) ratios of different businesses.

0 / 5. 0

Current and Quick (Acid-Test Ratios in Accounting) Question 1. The current ratio for Potz and Pans has been calculated as 5.00:1 whereas the current ratio for WannaBees has been calculated as 1.76:1. Based on these results, it is prudent to assume that Potz and Pans is most likely to get the loan, although WannaBees also has good results. This is because the ratio is a measure of a company's capacity to meet its financial obligations. Both companies have current ratio figures greater than 1 to indicate that their assets are greater than the liabilities. Given that Potz and Pans has the highest ratio, it can be inferred that this is an indication that the company is financially well off. Still, the figures must be approached with caution since the high figures can also be an indication that the company is not making the best use of its working capital, has not secured financing and is not making efficient use of its current assets. In this respect, the current ratio results show that Potz and Pans is more likely to get the loan when compared to WannaBees. Question 2. The acid-test ratio for Potz and Pans has been calculated as 1.67:1 whereas the acid-test ratio for WannaBees has been calculated as 0.29:1. Based on the results, Potz and Pans should receive the loan. This is because the company has a ratio figure of 1.67:1 to indicate that for every $1 of current liability, the company has $1.67 liquid assets value to cover its immediate obligations. In addition, the figure shows that the company is collecting its receivables at a fast rate, paying its bills at the right time, growing sales and is not overleveraged. In contrast, WannaBees should not receive the loan

Related samples

Name Name von Professor Disziplin Datum Inhalt TOC o "1-3" h z u 1 Einleitung PAGEREF _Toc507996845 h 32 Chancen und Risiken der Digitalisierung PAGEREF _Toc507996846 h...

Motivation und Gesundheitsverhalten Inhaltsverzeichnis TOC o "1-3" h z u Abbildungsverzeichnis PAGEREF _Toc507269413 h 31. Gesundheit und gesundheitsbezogenes...


DESCARTES MEDITATION Student’s Name Institution Introduction This term paper reflects Descartes’ meditation. It gives a critical analysis concerning the...

Student’s Name: Professor’s Name: Course Number: Date: Schizophrenia Psychological disorders are a pattern of irregular thoughts and behaviors which impede a...


Leave feedback

Your email address will not be published. Required fields are marked *