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)

a. Times-interest-earned ratio b.quick ratio c. current ratio

Answer 1

(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