A Corporation Reports the Following Year-End Balance Sheet Data Calculate the Corporation's Current Ratio and Its Acid-Test Ratio

question 123

Essay

A corporation reports the following year-end balance sheet data:
$\begin{array}{|l|r|l|r|}\hline \text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 64,000 \\\hline \text { Accounts receivable } & 35,000 & \text { Long-term liabilities } & 72,000 \\\hline \text { Inventory } & 60,000 & \text { Common stock } & 100,000 \\\hline \text { Equipment } & \underline{150,000} & \text { Retained earnings } & 49,000 \\\hline \text { Total assets } & \$ 285,000 & \text { Total liabilities and equity } & \$ 285,000 \\\hline\end{array}$ Calculate the corporation's current ratio and its acid-test ratio.

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Definitions:

Consumer Surplus

The difference between the maximum price a consumer is (or consumers are) willing to pay for an additional unit of a product and its market price; the triangular area below the demand curve and above the market price.

Willing To Pay

The maximum amount an individual is prepared to spend to purchase a good or service or to avoid something undesirable.

Moral Hazard

A situation in economics where one party is willing to take risks because the costs that could result will not be borne by that party.

Behavior Alteration

The modification or change in individual or group behaviors, often initiated by interventions or environmental modifications.