Quick Ratio (in millions) Smith and Sons, Inc. Balance Sheet (in millions) Calcu

Question

Quick Ratio

(in millions)

Smith and Sons, Inc.

Balance Sheet

(in millions)

Calculate the quick ratio for Smith & Sons, Inc., for 2015 and 2016.
Round answers to two decimal places.

Smith and Sons, Inc.
Income Statement

(in millions)

2016 2015 Net sales $10,000 $9,500 Cost of goods sold (5,500) (5,200) Gross profit 4,500 4,300 Selling and administrative expenses (2,800) (2,700) Income from operations 1,700 1,600 Interest expense (300) (250) Income before income taxes 1,400 1,350 Income tax expense (420) (400) Net income $980 $950

Explanation / Answer

For the year 2015 Quick ratio = Quick assets / current liabilities Quick assets = Total Current Assets - Inventories = $2,100 - $650 = $1,450 Current Liabilities = $2,900 Quick ratio = $1450 / $2,900 = 0.50 For the year 2016 Quick ratio = Quick assets / current liabilities Quick assets = Total Current Assets - Inventories = $2,000 - $500 = $1,500 Current Liabilities = $3,000 Quick ratio = $1,500 / $3,000 = 0.50 Year Answer (in fraction) 2015           0.50 1/2 ($1,450 / $2,950) 2016           0.50 1/2 ($1,500 / $3,000)

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