Question

Select any one public company that interests you, look up its stock symbol on the Internet, and enter this symbol into the Quote Lookup box under the Finance link at Yahoo. Using the data available, calculate the Current Ratio and Quick Ratio for this company. Is there a difference between these two measures for this specific organization? Why or why not? If there is a difference, explain what exactly is causing it.

Answer 1

I chose Apple Inc., and its stock symbol is AAPL.

The Current Ratio of the Company as on 30th september, 2017 is -

Current ratio: Current Assets / Current Liabilities => $128,645,000 / $100,814,000 = 1.276 times

The Quick Ratio of the Company as on 30th september, 2017 is -

Quick ratio: Quick Assets / Current Liabilities

Where., Quick Assets: Cash + Cash Equivalents + Short Term Investments + Marketable Securities => 20,289,000 + 53,892,000 + 35,673,000 = $109,854,000

Therefore Quick ratio => $109,854,000 / $100,814,000 = 1.09 times (approx.)

As evident, there is difference between the current ratio and quick ratio of the company. The main reason for the difference between current ratio and quick ratio is the existence of Inventory and Other current assets in current assets segment which form part of computation of current ratio but not in quick ratio