Selected financial data regarding current assets and current liabilities for ACM

Question

Selected financial data regarding current assets and current liabilities for ACME Corporation and Wayne Enterprises, are as follows: Wayne (S in millions) Current assets: Corporation Enterprises Cash and cash equivalents Cutrent investments Net receivables $ 389 225 547 146 8.009 195 581 10.618 1345 Other current assets Total current assets 12.939 9,122 Current labilities: Cutrent debt Accounts payable and accrued liabilities Other current liabilities 8.021 747 1.151 $ 4.206 1,001 2.495 Total current liabilities 10.919 s7.702 Required 1-a. Calculate the current ratio for ACME Corporation and Wayne Enterprises. (Enter your answers in millions (i.e., $5,500,000 should be entered as 5.5).) Ratio Total current 1.18 Total cument labilites 7.702 1-b. Which company has the better ratio? O Wayne Enterprises ACME Corporation 2-a. Calculate the acid-test (quick) ratio for ACME Corporation and Wayne Enterprises. (Enter your answers in millions. (i.e., $5,500,000 should be entered as 5.5.)) Test Ratio 2320213 $ 10 Total cument labilities

Explanation / Answer

1a) Current ratio = current assets / current liabilities

1b) ACME Enterprises has a slighly better ratio but the difference is extremely low. Both the enterprises have a ratio of less than 2 which is low as per the ideal ratio of 2.

2a) Acid test ratio = Quick assets / current liabilities

Quick assets =current assets - inventory

ACME Enterprises Wayne Enterprises Current assets $12,939 $9,122 Current liabilities $10,919 $7,702 Current ratio 1.185 1.184

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