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Galaxy United, Inc. 2009 Income Statement ($ in millions) Net sales $8,500 Less:

ID: 2745196 • Letter: G

Question

Galaxy United, Inc.
2009 Income Statement
($ in millions)

Net sales $8,500

Less: Cost of goods sold 7,190

Less: Depreciation 420

Earnings before interest and taxes 890

Less: Interest paid 80

Taxable Income 810

Less: Taxes 284

Net income $ 527

2008

2009

2008

2009

1,480     

1,520      

  510     

736    

3,190     

3,630      

$5,730     

$6,080      

$5,730    

$6,080    


What is the quick ratio for 2009?

Galaxy United, Inc.
2008 and 2009 Balance Sheets
($ in millions)

2008

2009

2008

2009

  Cash $   120      $ 150         Accounts payable $1,110        $1,150       Accounts rec. 940      780         Long-term debt   960        1,244       Inventory

1,480     

1,520      

  Common stock $3,150      $2,950       Sub-total $2,540      $2,450         Retained earnings

  510     

736    

  Net fixed assets

3,190     

3,630      

  Total assets

$5,730     

$6,080      

  Total liab. & equity

$5,730    

$6,080    

Explanation / Answer

Quick Ratio = (current assets - inventory)/current liabilities

In this case:
Current assets = cash + accounts receivable + inventory
Current liabilities = accounts payable

Quick ratio in 2009 = (cash + accounts receivable)/accounts payable
= (150 + 780)/1150
= 0.808696