Question

Use the following information: Windswept, Inc. 2017 Income Statement ($ in millions) Net sales $10,160 Cost of goods sold 8,210 Depreciation 510 Earnings before interest and taxes $1,440 Interest paid 122 Taxable income $1,318 Taxes 461 Net income $857 Windswept, Inc. 2016 and 2017 Balance Sheets ($ in millions) 2016 2017 2016 2017 Cash $320 $350 Accounts payable $1,730 $1,610 Accounts rec. 1,180 1,080 Long-term debt 1,190 1,390 Inventory 2,080 1,830 Common stock 3,520 3,520 Total $3,580 $3,260 Retained earnings 730 980 Net fixed assets 3,590 4,240 Total assets $7,170 $7,500 Total liab.& equity $7,170 $7,500 What is the quick ratio for 2017?a. 89 times.b. 1.81 times.c. 1.14 times.d. 88 times.e. 2.02 times.

Answer 1

See below

Step-by-step explanation:

Given the information above, Quick ratio is computed as shown below;

Quick ratio = Quick assets / Current liabilities

Where,

Quick assets = Cash and cash equivalents + Marketable securities + Account receivables

Current liabilities = Bills payable + Accounts payable + Other short term liabilities

From the balance sheet, Quick assets includes cash and account receivables, while Current liabilities includes Accounts payable only

Quick ratio = $350 + $1,080 / $1,610

Quick ratio = $1,430/ $1,610

Quick ratio = 0.89 times

Therefore, the quick ratio for 2017 is 0.89 times