The most recent balance sheet of Raconteurs, Inc. (in millions) is as follows: Current assets Cash and

Question:

The most recent balance sheet of Raconteurs, Inc. (in millions) is as follows:

Current assets

Cash and marketable securities ..........$ 10

Accounts receivable ............. 40

Inventory ................. 60

Total ...................$110

Current liabilities

Accrued wages and taxes ...........$ 5

Accounts payable .............. 35

Notes payable ................ 30

Total ...................$ 70

a. Calculate Raconteurs’ current ratio and acid-test (quick) ratio.

b. Benchmark ratios for the current and acid-test (quick) ratio are 1.50 and 1.20, respectively. What can you say about the liquidity of Raconteur’s operations based on these two ratios?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...