Question

The most recent data from the annual balance sheets of N&B Equipment Company and Jing Foodstuffs Corporation are as follows: Balance Sheet December 31st (Millions of dollars) Jing Foodstuffs Corporation N&B Equipment Company Jing Foodstuffs Corporation N&B Equipment Company Assets Liabilities Current assets Current liabilities Cash $574 $369 Accounts payable $0 $0 Accounts receivable 210 135 Accruals 127 0 Inventories 616 396 Notes payable 717 675 Total current assets $1,400 $900 Total current liabilities $844 $675 Net fixed assets Long-term bonds 1,031 825 Net plant and equipment 1,100 1,100 Total debt $1,875 $1,500 Common equity Common stock $406 $325 Retained earnings 219 175 Total common equity $625 $500 Total assets $2,500 $2,000 Total liabilities and equity $2,500 $2,000 N&B Equipment Company’s current ratio is , and its quick ratio is ; Jing Foodstuffs Corporation’s current ratio is , and its quick ratio is . Note: Round your values to four decimal places.

Answer 1

Answer: N&B Equipment Company:

Current ratio = 1.33

Quick ratio = 0.746

Jing Foodstuffs Corporation:

Current ratio = 1.65

Quick ratio = 0.928

Explanation:

For N&B Equipment Company:

$Current\ Ratio=\frac{Current\ Assets}{Current\ liabilities}$

$Current\ Ratio=\frac{900}{675}$

                             = 1.33

$Quick ratio=\frac{Current\ Assets - Inventory}{Current\ Liabilities}$

$Quick ratio=\frac{900 - 396}{675}$

                        = 0.746

For Jing Foodstuffs Corporation:

$Current\ Ratio=\frac{Current\ Assets}{Current\ liabilities}$

$Current\ Ratio=\frac{1,400}{844}$

                             = 1.65

$Quick ratio=\frac{Current\ Assets - Inventory}{Current\ Liabilities}$

$Quick ratio=\frac{1,400 - 616}{844}$

                        = 0.928