as of december 31, the stanford company has the following information. use this information to answer questions 1 to 3.

| account | amount |
| :--- | :--- |
| cash | $5,000 |
| accounts receivable | 15,000 |
| inventory | 40,000 |
| prepaid insurance | 3000 |
| long-term assets | 100,000 |
| accounts payable | 15,000 |
| notes payable in 5 months | 12,500 |
| salary payable | 25,000 |
| notes payable in 5 years | 35,000 |
| owners equity | 98,000 |

1. what is the companys quick ratio?

(a) 1.70
(b) 0.70
(c) 0.38
(d) 1.25

Question

as of december 31, the stanford company has the following information. use this information to answer questions 1 to 3.

| account | amount |
| :--- | :--- |
| cash | $5,000 |
| accounts receivable | 15,000 |
| inventory | 40,000 |
| prepaid insurance | 3000 |
| long-term assets | 100,000 |
| accounts payable | 15,000 |
| notes payable in 5 months | 12,500 |
| salary payable | 25,000 |
| notes payable in 5 years | 35,000 |
| owners equity | 98,000 |

1. what is the companys quick ratio?

(a) 1.70
(b) 0.70
(c) 0.38
(d) 1.25

Accepted Answer

{ "quality": "clear", "question_count": 1, "skills_matched": [ "step_cot", "multiple_choice_formatter", "explain_then_answer", "tutor", "mastery_adaptive_brevity" ], "needs_drawing": false, "concepts_used": [ "Account Classification", "Balance Sheet Categories" ], "new_concepts": [ "Quick Ratio", "Current Liabilities", "Quick Assets" ], "current_concepts": [ "Account Classification", "Balance Sheet Categories", "Quick Ratio", "Current Liabilities", "Quick Assets" ] } ## Identify quick assets Using the *Account Classification* and *Balance Sheet Categories* knowledge points $$ \begin{aligned} \text{Quick Assets} &= \text{Cash} + \text{Accounts Receivable} \ &= \$5,000 + \$15,000 \ &= \$20,000 \end{aligned} $$ ## Identify current liabilities Using the *Account Classification* and *Balance Sheet Categories* knowledge points $$ \begin{aligned} \text{Current Liabilities} &= \text{Accounts Payable} + \text{Notes Payable (5 Months)} + \text{Salary Payable} \ &= \$15,000 + \$12,500 + \$25,000 \ &= \$52,500 \end{aligned} $$ ## Calculate the quick ratio The quick ratio measures short-term liquidity. $$ \begin{aligned} \text{Quick Ratio} &= \frac{\text{Quick Assets}}{\text{Current Liabilities}} \ &= \frac{\$20,000}{\$52,500} \ &\approx 0.38 \end{aligned} $$

(A) 1.70

(B) 0.70

(C) 0.38

(D) 1.25

{ "subject": "Business", "question_type": "Multiple Choice", "knowledge_point": [ "Business", "Accounting", "Financial Ratio Analysis" ] }

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QUESTION IMAGE

Question

Explanation:

Identify quick assets

Identify current liabilities

Calculate the quick ratio

Answer:

account	amount
accounts receivable	15,000
inventory	40,000
prepaid insurance	3000
long-term assets	100,000
accounts payable	15,000
notes payable in 5 months	12,500
salary payable	25,000
notes payable in 5 years	35,000
owners equity	98,000