SDJ, Inc., has net working capital of $940, current liabilities of $6,700, and inventory of $1,110.

SDJ, Inc., has net working capital of $940, current liabilities of $6,700, and inventory of $1,110.

Requirement 1:

What is the current ratio? (Round your answer to 2 decimal places (e.g., 3.16).)

 

Current ratio

times

Requirement 2:

What is the quick ratio? (Round your answer to 2 decimal places (e.g., 3.16).)

 

Quick ratio

times

Explanation:

1.

To find the current assets, we must use the net working capital equation. Doing so, we find:

 

NWC	=	Current assets – Current liabilities
$940	=	Current assets – $6,700
Current assets	=	$7,640

 

Now, use this number to calculate the current ratio and the quick ratio. The current ratio is:

 

Current ratio	=	Current assets / Current liabilities
Current ratio	=	$7,640 / $6,700
Current ratio	=	1.14 times

2.

And the quick ratio is:

 

Quick ratio	=	(Current assets – Inventory) / Current liabilities
Quick ratio	=	($7,640 – 1,110) / $6,700
Quick ratio	=	.97 times