Assume the Following Data: Current Assets = 500; Current Liabilities

question 4

Multiple Choice

Assume the following data: Current assets = 500; Current liabilities = 250; Inventory = 200; Account receivables = 200.Calculate the quick ratio.

• A)1
• B)2
• C)1.2
• D)0.4

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Definitions:

Asset Turnover

Asset turnover is a financial ratio that measures the efficiency of a company in using its assets to generate sales or revenue.

Depreciation Expense

The allocation of the cost of a tangible asset over its useful life, representing the wear and tear or obsolescence of the asset.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded against a fixed asset since it was put into use, reducing its book value on the balance sheet.

Asset Turnover

A financial ratio that measures how efficiently a company uses its assets to generate sales, calculated by dividing total revenues by average assets.