Q1. SDJ, Inc., has net working capital of $1,570, current liabilities of $4,380, and inventory of $1,875.
What is the current ratio? What is the quick ratio?
Using the formula for NWC, we get:
NWC = CA – CL
CA = CL + NWC = $1,570 + 4,380 = $5,950
So, the current ratio is:
Current ratio = CA / CL = $5,950/$4,380 = 1.36 times
And the quick ratio is:
Quick ratio = (CA – Inventory) / CL = ($5,950 – 1,875) / $4,380 = 0.93 times.
Q2. The Mississippi Moon Corporation has ending inventory of $324,600, and cost of goods sold for the
year just ended was $2,987,165. What is the inventory turnover? The days’ sales in inventory? How long
on average did a unit of inventory sit on the shelf before it was sold?
