A restaurant reported the following current assets
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A restaurant reported the following current assets

Referring to information in Exercise 4.1, calculate working capital and describe what it means.

Exercise 4.1

A restaurant reported the following current assets: cash $12,000, credit card receivables $1,800, accounts receivable $180, food inventory $4,400, and prepaid expenses, $1,120. Current liabilities total $7,800. Answer the following:

a. Calculate the current ratio.

b. Calculate the quick ratio (acid test ratio).

Hint
Accounts & FinanceThe current ratio is a liquidity ratio that measures a company’s ability to pay short-term obligations or those due within one year. It tells investors and analysts how a company can maximize the current assets on its balance sheet to satisfy its current debt and other payables....

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