Airline Accessories has the following current assets: cash, $112 million; receiv

Question

Airline Accessories has the following current assets: cash, $112 million; receivables, $104 million; inventory, $192 million; and other current assets, $28 million. Airline Accessories has the following liabilities: accounts payable, $118 million; current portion of long-term debt, S45 million; and long-term debt, S33 million Based on these amounts, calculate the current ratio and the acid-test ratio for Ainline Accessories. (Enter your answers in millions (i.e. 5,000,000 should be entered as 5).) Current Ratio Acid-Test Ratio

Explanation / Answer

Current Ratio

$436 Million

/

$163 Million

=

2.67

Acid-Test Ratio

$244 Million

$163 Million

=

1.50

Current Ratio = Current Assets / Current Liabilities

Current Assets = Cash + Receivables + Inventories + Other Current Assets

= $112 + 104 + 192 + 28

= $436 Million

Current Liabilities = Accounts Payable + Current portion of Long term debt

= $118 + 45

= $163 Million

Current Ratio = $436 Million / $163 Million = 2.67

Acid-Test Ratio = [Current Assets – Inventories] / Current Liabilities

= [$436 Million - $192 Million] / $163 Million

= $244 Million / $163 Million

= 1.50

Current Ratio

$436 Million

/

$163 Million

=

2.67

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