Selected financial data regarding current assets and current liabilities for two competing companies, Simon and Garfunkel, are provided as follows: $$\begin{array} { l r r r }
\text { (\$ in millions) } & \text { Simon } & \text { Garfunkel } \
\text { Current assets } \
\quad \text { Cash and cash equivalents } & \$ 648 & \$ 2,917 \
\text { Short-term investments } & 3,676 & \
\text { Net receivables } & 991 & 1,372 \
\text { Inventory } & 515 & 202 \
\text { Other current assets } & 334 & 476 \
\text { Total current assets } & \$ 6,164 & \$ 4,967 \
\text { Current liabilities } & & \
\text { Accounts payable } & \$ 7,081 & \$ 4,295 \
\text { Short-term debt } & 1,239 & 1,021 \
\text { Other current liabilities } & & 1,308 \
\text { Total current liabilities } & \$ 8,320 & \$ 6,624 \
\end{array}$$ 1. Calculate the current ratio for Simon. Then calculate the current ratio for Garfunkel. Which of the two companies has the best current ratio?
2. Calculate the acid-test (quick) ratio for Simon. Then calculate the acid-test (quick) ratio for Garfunkel. Which of the two companies has the best acid-test ratio?

Question

Selected financial data regarding current assets and current liabilities for two competing companies, Simon and Garfunkel, are provided as follows: $$\begin{array} { l r r r } 
\text { (\$ in millions) } & \text { Simon } & \text { Garfunkel } \
\text { Current assets } \
\quad \text { Cash and cash equivalents } & \$ 648 & \$ 2,917 \
\text { Short-term investments } & 3,676 & \
\text { Net receivables } & 991 & 1,372 \
\text { Inventory } & 515 & 202 \
\text { Other current assets } & 334 & 476 \
\text { Total current assets } & \$ 6,164 & \$ 4,967 \
\text { Current liabilities } & & \
\text { Accounts payable } & \$ 7,081 & \$ 4,295 \
\text { Short-term debt } & 1,239 & 1,021 \
\text { Other current liabilities } & & 1,308 \
\text { Total current liabilities } & \$ 8,320 & \$ 6,624 \
\end{array}$$ 1. Calculate the current ratio for Simon. Then calculate the current ratio for Garfunkel. Which of the two companies has the best current ratio?
2. Calculate the acid-test (quick) ratio for Simon. Then calculate the acid-test (quick) ratio for Garfunkel. Which of the two companies has the best acid-test ratio?

Quizplus · Accepted Answer

The Answer of Selected financial data regarding current assets and current liabilities for two competing companies, Simon and Garfunkel, are provided as follows: $$\begin{array} { l r r r } 
\text { (\$ in millions) } & \text { Simon } & \text { Garfunkel } \
\text { Current assets } \
\quad \text { Cash and cash equivalents } & \$ 648 & \$ 2,917 \
\text { Short-term investments } & 3,676 & \
\text { Net receivables } & 991 & 1,372 \
\text { Inventory } & 515 & 202 \
\text { Other current assets } & 334 & 476 \
\text { Total current assets } & \$ 6,164 & \$ 4,967 \
\text { Current liabilities } & & \
\text { Accounts payable } & \$ 7,081 & \$ 4,295 \
\text { Short-term debt } & 1,239 & 1,021 \
\text { Other current liabilities } & & 1,308 \
\text { Total current liabilities } & \$ 8,320 & \$ 6,624 \
\end{array}$$ 1. Calculate the current ratio for Simon. Then calculate the current ratio for Garfunkel. Which of the two companies has the best current ratio?
2. Calculate the acid-test (quick) ratio for Simon. Then calculate the acid-test (quick) ratio for Garfunkel. Which of the two companies has the best acid-test ratio?

Selected Financial Data Regarding Current Assets and Current Liabilities for Two