# The current ratio of a company is 5:1

The current ratio of a company is 5:1

Answer each of the questions in the following unrelated situations.
(a) The current ratio of a company is 5:1 and its acid-test ratio is 1:1. If the inventories and prepaid items amount to \$500,000, what is the amount of current liabilities
(b) A company had an average inventory last year of \$200,000 and its inventory turnover was 5. If sales volume and unit cost remain the same this year as last and inventory turnover is 8 this year, what will average inventory have to be during the current year
(c) A company has current assets of \$90,000 (of which \$40,000 is inventory and prepaid items) and current liabilities of \$40,000. What is the current ratio What is the acid-test ratio If the company borrows \$15,000 cash from a bank on a 120-day loan, what will its current ratio be What will the acid-test ratio be

(d) A company has current assets of \$600,000 and current liabilities of \$240,000. The board of directors declares a cash dividend of \$180,000. What is the current ratio after the declaration but before pay- ment What is the current ratio after the payment of the dividend

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