Urban Wear Clothes Co. had the following current assets and liabilities for two comparative years:
|
|
Dec. 31, 2008 |
Dec. 31, 2007 |
|
Current assets: |
|
|
|
Cash |
$140,000 |
$205,000 |
|
Accounts receivable |
250,000 |
245,000 |
|
Inventory |
300,000 |
180,000 |
|
Total current assets |
$690,000 |
$630,000 |
|
Current liabilities: |
|
|
|
Current portion of long term debt |
$ 50,000 |
$ 50,000 |
|
Accounts payable |
200,000 |
190,000 |
|
Accrued expenses payable |
140,000 |
135,000 |
|
Total current liabilities |
$390,000 |
$375,000 |
a. Determine the quick ratio for December 31, 2008 and 2007.
b. Interpret the change in the quick ratio between the two balance sheet dates.