The Following Information Is Available for Trico and Its Two

question 33

Essay

The following information is available for Trico and its two main competitors in the industry (Duco and Unico):
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:

Fixed Costs

Expenses that do not change in total irrespective of the volume of goods or services produced by a company.

Break Even

The point at which total revenues equal total expenses, with no net loss or profit.

Variable Costs

Expenses that are directly tied to the rate of goods produced or services sold, such as the cost of materials and labor involved.

Fixed Costs

Costs that remain constant for a business over a period, regardless of the level of goods or services produced.