Potz and Pans, a small gift shop, has current assets of $45,000 (including inventory
valued at $30,000) and $9,000 in current liabilities. Wannabees, a specialty clothing
store, has current assets of $150,000 (including inventory valued at $125,000) and
$85,000 in current liabilities. Both businesses have applied for loans. Click the
calculators box on the toolbar at bankrate.com then click on Small Business to answer
the following questions.
1) Calculate and present the current ratio for each company. Which company is more
likely to get the loan? Why?
2) The acid test ratio subtracts the value of the firm's inventory from its total current
assets. Because inventory is often difficult to sell, this ratio is considered an even more