Question - Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:
|
Edison
|
Stagg
|
Thornton
|
|
Cash
|
$6,000
|
$5,000
|
$4,000
|
|
Short-term investments
|
3,000
|
2,500
|
2,000
|
|
Accounts receivable
|
2,000
|
2,500
|
3,000
|
|
Inventory
|
1,000
|
2,500
|
4,000
|
|
Prepaid expenses
|
800
|
800
|
800
|
|
Accounts payable
|
200
|
200
|
200
|
|
Notes payable: short-term
|
3,100
|
3,100
|
3,100
|
|
Accrued payables
|
300
|
300
|
300
|
|
Long-term liabilities
|
3,800
|
3,800
|
3,800
|
Compute the current and quick ratios for each of the three companies. Which firm is the most liquid? Why?