Asked by Rachael Petersen on May 16, 2024
Verified
Jones Corporation wrote off $150,000 of obsolete inventory at December 31,2014.
Required:
Describe the effect of this write-off on the company's 2014 current and quick ratios.
Quick Ratios
A liquidity metric that measures a company's ability to cover its current liabilities with its most liquid assets, excluding inventory.
Obsolete Inventory
Items that can no longer be sold due to outdating, changes in market demands, or deterioration, often leading to their removal from inventory at a loss.
Current Ratio
A financial metric illustrating a firm's capacity to cover its short-term debts within a year, determined by dividing current assets by current liabilities.
- Evaluate the influence of particular transactions on a firm's liquidity metrics, comprehending their impact on both current and quick ratios.
Verified Answer
Learning Objectives
- Evaluate the influence of particular transactions on a firm's liquidity metrics, comprehending their impact on both current and quick ratios.
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