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:

Confederate

An individual who is part of an experiment but pretends to be a participant and is aware of the study's aims.

Experimental

Pertaining to a methodological approach that involves manipulating one variable to determine if changes in one variable cause changes in another variable.

Independent Variable

The variable in an experimental setup that is manipulated or changed to observe its effect on the dependent variable.

Dependent Variable

In an experiment, the variable that is being tested and measured; it is 'dependent' on the independent variable.