Measures of Solvency and Credit Risk
Shown Below Are Selected

question 52

Essay

Measures of solvency and credit risk
Shown below are selected items appearing in a recent balance sheet of Grant Products. (Dollar amounts are in thousands.)
(a) Compute the following:
(1) Total quick assets $____________
(2) Total current assets $____________
(3) Total current liabilities $____________
(4) Quick ratio ______ to 1
(5) Current ratio ______ to 1
(b) Research indicates an industry average quick ratio is 1.3 to 1, and a current ratio of 2.3 to 1. Based upon this information, does Grant Products appear more or less solvent than the average company in its industry? Explain briefly.
$$\begin{array} { | l | r | } \hline \text { Cash and cash equivalents } & \$ 620 \\\hline \text { Investments in marketable securities } & \$ 300 \\\hline \text { Receivables } & \$ 1,400 \\\hline \text { Inventories } & \$ 1,100 \\\hline \text { Prepaid expense and other current assets } & \$ 450 \\\hline \text { Plant and equipment } & \$ 3,300 \\\hline \text { Accounts payable } & \$ 1,600 \\\hline \text { Bank loans payable within one year } & \$ 300 \\\hline \text { Income taxes payable } & \$ 300 \\\hline \text { Retained earnings } & \$ 1,700 \\\hline\end{array}$$

---

Definitions:

Windings

Coils of wire, typically copper, wound around a core or form, used in electrical machines and devices to generate magnetic fields or induce voltages.

Drive Gear

A gear that transmits power from the engine to the drivetrain in a vehicle, facilitating movement.

Armature

The rotating coil or core of a generator or motor on which the winding is placed and electrical current is induced.

Driveshaft

A mechanical component for transmitting torque and rotation, usually used in vehicles to connect other components of the drivetrain that cannot be directly connected.