Measures of Solvency and Credit Risk

question 81

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.

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Definitions:

Price Received

The amount of money paid to a seller for the sale of goods or services.

Production Function

A production function is a mathematical model that describes the relationship between inputs and the maximum output that can be produced with those inputs.

Supply Function

A mathematical relationship that depicts how the quantity of goods supplied by producers changes in response to different factors, such as price.

Factor Price

The price paid for the use of a factor of production, such as labor, land, or capital, in the production of goods and services.