Ratio Analysis Presented below are summary financial data from Pompeo\'s annual
ID: 2533103 • Letter: R
Question
Ratio Analysis Presented below are summary financial data from Pompeo's annual report:( Amounts in millions )
Balance Sheet:?
Cash and Cash Equivalents $2,200
Marketable Securities 16,200
Accounts Receivable (net) 10,000
Total Current Assets 42,000
Total Assets 155,000
Current Liabilities 30,000
Long-Term Debt 47,500
Shareholders' Equity 79,500
Income Statement:
Interest Expense 6,400
Net Income Before Taxes 36,800
Calculate the following ratios:
(Round to 2 decimal points)
b.quick ratio
c. current ratio
Explanation / Answer
(a) Times-interest-earned ratio = 6.75 Times
= ( Net Income Before Taxes + Interest Expense ) / Interest Expense
= ($36,800 + $6,400 ) / $6,400
= $43,200 / $6,400
= 6.75 Times
(b) Quick Ratio = 0.95
Quick Ratio = Liquid Current Assets / Total Current Liabilities
Liquid Current Assets
= Cash & Cash Equivalents + Marketable Securities + Accounts Receivables
= $2,200 + $16,200 + $10,000
= $28,400
Total Current Liabilities = $30,000
Therefore, Quick Ratio = $28,400 / $30,000 = 0.95
(c) Current Ratio = 1.4
= Total Current Assets / Total Current Liabilities
= $42,000 / $30,000
= 1.4
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