Answer:
Please find the detailed answer in the explanation section
Explanation:
1. Current ratio = Curren assets / Curren liabilities.
For Simon:
Current assets are:
Cash and cash equivalents $ 620
Short-term investments $3,690
Net receivables $992
Inventory $510
Other current assets $335
Total current assets $6,147
Current liabilities are:
Accounts payable $7,220
Short-term debt $1,270
Other current liabilities. $0
Total current liabilities $8,490
So current asset is $6,147/$8,490
0.72:1
For Garfunkel:
Current assets are:
Cash and cash equivalents $2,920
Short-term investments $0
Net receivables $1,330
Inventory $203
Other current assets $477
Total current assets $4,930
Current liabilities are:
Accounts payable $4,285
Short-term debt $1,028
Other current liabilities. $1,306
Total current liabilities $6,619
So current asset is $4,930/$6,619
0.74:1
1b Simon current asset is 0.72 while Garfunkel's own is 0.74
Therefore Garfunkel with 0.74 has a better current ratio
2a. Acid-test ratio = total current assets minus Inventory / total current liabilities
For Simon:
($6,147 - $510) / $8,490
=0.66:1
For Garfunkel:
($4,930 - $203) / $6,619
=0.71:1
2b. Garfunkel with 0.71 has a better acid-test ratio
