Answer (A) is correct . The cash ratio, a more conservative measure of liquidity than the quick ratio, is calculated as follows: Cash ratio = (Cash + Marketable securities) ¡Â Current liabilities = ($200,000 + $100,000) ¡Â $600,000 = 0.5Answer (B) is incorrect because Improperly including only inventories in the numerator results in a ratio of .80.
Answer (C) is incorrect because Improperly including accounts receivable in the numerator results in a ratio of 1.00.
Answer (D) is incorrect because Improperly including accounts receivable and prepaid expenses in the numerator results in a ratio of 1.20.
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In order to determine Kryton’s ability to pay current obligations, the financial analyst would calculate Kryton’s cash ratio as