ACC 205 Week 5 Assignment

 

Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?
Current Ratio            = Current Assets / Current Liabilities

                                   

            Edison                        = 12,800 / 3,600

                                    = 3.56

 

            Stagg               = 13,800 / 3,600

                                    = 3.83

 

            Thornton        = 13,800 / 3,600

                                    = 3.83

 

Quick Ratio                = Quick Assets / Current Liabilities

                                   

            Edison                        = 11,000 / 3,600

                                    = 3.05

 

            Stagg               = 10,000 / 3,600

                                    = 2.78

 

            Thornton        = 9,000 / 3,600

                                    = 2.5

 

The Current ratios of Stagg and Thornton are higher than Edison. Hence these two are better in liquidity than Edison. However, in terms of quick ratio, Edison is the best, having highest quick ratio of 3.05. Stagg is on second position, having quick ratio of 2.78, which is better than Thornton. Edison has the best liquidity when it comes to quick ratios.

 

 
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