Question

1. Calculate the current ratio and the acid-test ratio for Queen's Line. (Enter your answers in millions, not in dollars. For example, $5,500,000 should be entered as 5.5.)'

Answer 1

Answer:

0.31

0.27

Explanation:

Here is the full question used in answering this question

Selected financial data regarding current assets and current liabilities for Queen's Line, a competitor in the cruise line industry, is provided: (Enter your answers in millions, not in dollars.)

($ in ,millions)

Current assets:

Cash and cash equivalents $307

Current investments 82

Net receivables 218

Inventory 122

Other current assets 138

Total current assets $867

Current liabilities:

Accounts payable $1,165

Short-term debt 709

Other current liabilities 904

Total current liabilities $2,778

Required:

Calculate the current ratio and the acid-test ratio for Queen's Line

Current ratio is an example of a liquidity ratio. Liquidity ratios measure a firm's ability to honour its short terms obligations. the higher the current ratio, the higher the firm's liquidity and its ability to meet short term obligations

Current ratio = current asset /current liability

867 / 2778 = 0.31

Acid test ratio also known as the quick ratio measure the ability of short term assets to meet current liabilities

Acid test ratio = (current asset - inventory) / current liabilities

(867 - 122) / 2778 = 0.27