Review problem—understanding liquidity measures Assume that the currentratio for Arch Company is 2.0, its acid-test ratio is 1.5, and its working capital is$300,000. Answer each of the following questions independently, always referring tothe original information.a. How much does the firm have in current liabilities?b. If the only current assets shown on the balance sheet for Arch Company areCash, Accounts Receivable, and Merchandise Inventory, how much does thefirm have in Merchandise Inventory?c. If the firm collects an account receivable of $100,000, what will its new currentratio and working capital be?d. If the firm pays an account payable of $100,000, what will its new current ratioand working capital be?e. If the firm sells inventory that was purchased for $50,000 at a cash price of$60,000, what will its new acid-test ratio be?
Review problem—understanding liquidity measures Assume that the current
ratio for Arch Company is 2.0, its acid-test ratio is 1.5, and its
$300,000. Answer each of the following questions independently, always referring to
the original information.
a. How much does the firm have in current liabilities?
b. If the only current assets shown on the
Cash,
firm have in Merchandise Inventory?
c. If the firm collects an account receivable of $100,000, what will its new current
ratio and working capital be?
d. If the firm pays an account payable of $100,000, what will its new current ratio
and working capital be?
e. If the firm sells inventory that was purchased for $50,000 at a cash price of
$60,000, what will its new acid-test ratio be?
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