Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 63

Computing the Quick Ratio and the Times Interest Earned Ratio
The balance sheet for Shaver Corporation reported the following: cash $5,000; short-term investments $10,000; net accounts receivable $35,000; inventory $40,000; prepaids $10,000; current liabilities, $40,000; total stockholders' equity, $90,000; net income, $3,320; interest expense, $4,400; income before income taxes, $5,280. Compute Shaver's quick ratio and times interest earned ratio. Based on these ratios, does it appear Shaver will be able to meet its obligations to pay current liabilities and future interest obligations as they become payable