Information from the 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 the Greg Company?

1. 1.60 3. 1.90 2. 1.76 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. Increase Increase 3. Increase No effect 4. No effect Increase