Taking it to the net
To calculate and analyze current ration and quick(acid-test)ratios
Exercise
Thingamajig and Things, a small gift shop, has total assets of $45,000(including inventory valued at $30,000) and $9,000 in liabilities. wannabees, a specialty clothing store, has total assets of $150,000(including inventory valued at $125,000) and $85,000in liablilities. Both buinesses have applied for loans. Use the calculators at Bankrat.com to answer the following question:
1. Calculate the current ratio for each company. comparing the ratios, which company is more likely to get th loan?why?
2. The quick (acid-test) ratio is considered an even more reliable measure of a business's ability to repay loans than the current ratio. because inventory is often difficult to liguidate, the value of the invtory is subtractted from the total curent assets. Calculate the quick ratio for each business. doyou think either business will get the loan? why or why not?