Question: Information from Greg Companys balance sheet follows: Current assets: Cash ....................$ 2,100,000 Marketable securities ............. 7,200,000 Accounts receivable ............... 50,500,000 Inventories ................. 65,000,000 Prepaid expenses
Information from Greg Company’s balance sheet follows:
Current assets:
Cash ....................$ 2,100,000
Marketable securities ............. 7,200,000
Accounts receivable ............... 50,500,000
Inventories ................. 65,000,000
Prepaid expenses ................ 1,000,000
Total current assets ............... $125,800,000
Current liabilities:
Notes payable ..................$ 1,400,000
Accounts payable ................ 18,000,000
Accrued expenses ............... 11,000,000
Income taxes payable ............. 600,000
Payments due within one year on long-term debt .. 3,000,000
Total current liabilities .............. $ 34,000,000
Required
Answer the following multiple-choice questions:
a. What is the acid-test ratio for Greg Company?
1. 1.60
2. 1.76
3. 1.90
4. 2.20
b. What is the effect of the collection of accounts receivable on the current ratio and net working capital, respectively?
Current Ratio Net Working Capital
1. No effect No effect
2. IncreaseIncrease
3. Increase No effect
4. No effect Increase
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