Ask Question
14 December, 15:31

Airline Accessories has the following current assets: cash, $96 million; receivables, $88 million; inventory, $176 million; and other current assets, $12 million. Airline Accessories has the following liabilities: accounts payable, $86 million; current portion of long-term debt, $29 million; and long-term debt, $17 million. Based on these amounts, calculate the current ratio and the acid-test ratio for Airline Accessories. (Enter your answers in millions, not in dollars. For example, $5,500,000 should be entered as 5.5.)

+3
Answers (1)
  1. 14 December, 16:18
    0
    current ratio = 3. 80 times

    Acid-test ratio = 2 times

    Explanation:

    The current ratio is the sum of sum of current assets divided by current liabilities. It is used ti measures the the ability of Airline Accessories to meet its short - term obligation falling due within a year

    Current ratio = 96 + 88 + 12 / (86 + 29)

    = 3. 80 : 1

    Acid test ratio also measures liquidity but with adjustment for risky current assets i. e inventory.

    Acid test ratio = current asset - inventory / Current liabilities

    = (96 + 88 + 12) / (86+29)

    =2 : 1
Know the Answer?