Impact on current and quick ratio
million. Of this total, $1.0 million is inventory, $0.5 million is cash, $1.0
million is accounts receivable, and the balance is marketable securities.
Jamesway has $1.5 million in current liabilities.
a. What are the currentand the quick ratios for Jamesway?
b. If Jamesway takes $.25 million in cash and pays off $.25
million of current liabilities, what happens to its current and quick ratios?
What happens to its real liquidity?
c. If Jamesway sells $.5 million of its accounts receivable
to a bank and uses the proceeds to pay off short-term debt obligations, what
happens to its current and quick ratios?
d. If Jamesway sells $1.0 million in new stock and places
the proceeds in marketable securities, what happens to its current and quick
ratios?
e. What do these examples illustrate about the current and
quick ratios?
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