Apex Corp Has Current Liabilities of $2 Million, a Current Ratio

question 27

Essay

Apex Corp. has current liabilities of $2 million, a current ratio of 3, a quick ratio of 2, and a cash ratio of .75. Given this information, answer the following about the firm's liquidity:
a. What is the value of inventory?
b. What is the value of receivables?
c. What will happen to each of the three ratios if $1 million in current liabilities is refunded with long-term debt?

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Definitions:

Rationalizing Away

Rationalizing away is the process of offering a rational, logical, or plausible reason for actions or attitudes that are actually motivated by different, often less acceptable reasons.

Fee Splitting

The practice where a professional shares a portion of their fee with another professional in exchange for a referral, considered unethical in many fields.

Outright Quackery

The promotion and sale of fraudulent or ignorant medical practices and products.

Unnecessary Surgery

Surgical interventions that are not essential for the health or survival of the patient and could be avoided.