A company has current liabilities of $500million, and its current ratio is 2 0. What is the total of its current assets? ($1,000 million) If this firm’s quick ratio is 1 6, how much inventory does it have? ($200 million) (Hint: To answer this problem and some of the other problems in this chapter, write out the equation for the ratio in the question, insert the given data, and solve for the missing value.)

Examples:

Current ratio 2 0 CA CL CA $500, so CA 2 $500 $1,000.

Quick ratio 1 6 CA Inventories CL $1,000 Inventories $500, so

$1,000 Inventories 1 6 $500 and Inventories $1,000 $800 $200.

AppendixLO1