CFA Practice Question

There are 534 practice questions for this study session.

CFA Practice Question

An analyst has gathered the following information about a firm: quick ratio of .25, cash ratio of .20, $2 million in marketable securities, $10 million in cash. What is their receivables balance?
A. $1 million
B. $3 million
C. $5 million
Explanation: Cash ratio = (cash + marketable securities)/current liabilities
.20 = ($10,000,000 + $2,000,000)/current liabilities
current liabilities = $12,000,000/.2 = $60,000,000
Quick ratio = [cash + marketable securities + receivables]/$60,000,000
.25 = [$10,000,000 + $2,000,000 + receivables]/$60,000,000
($60,000,000)(.25) = $12,000,000 + receivables $15,000,000
= $12,000,000 + receivables $15,000,000 - $12,000,000
= $3,000,000 receivables

User Contributed Comments 0

You need to log in first to add your comment.