The Following Information Is Available for Trico and Its Two

question 141

Essay

The following information is available for Trico and its two main competitors in the industry (Duco and Unico):
$$\begin{array} { | l | r | r | r | } \hline & \underline { \text { Trico } } & \underline { \text { Duco } } & \underline { \text { Unico } } \\\hline \text { Cash } & \$ 9,800 & \$ 10,500 & \$ 26,500 \\\hline \text { Short-term investments } & 6,400 & 8,200 & 12,500 \\\hline \text { Accounts receivable } & 12,500 & 8,500 & 14,350 \\\hline \text { Merchandise inventory } & 30,150 & 40,000 & 40,150 \\\hline \text { Prepaid expense } & 900 & 6,750 & 2,450 \\\hline \text { Accounts payable } & 19,400 & 13,750 & 26,800 \\\hline \text { Salaries payable } & 1,200 & 3,500 & 6,250 \\\hline \text { Other current payables } & 600 & 1,200 & 2,150 \\\hline\end{array}$$
The industry standard for the current ratio is 1.8 and the industry standard for the acid-test ratio is 1.
Required:
1. Calculate the current ratio and acid-test ratio for each firm.
2. Rank the firms in decreasing order of liquidity.
3. Comment on Trico's relative liquidity position.

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Definitions:

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