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.

Answer 1

Current ratio = 0.32 times

Acid-test ratio = 0.27 times

Step-by-step explanation:

The computation is shown below:

For current ratio

= Total Current assets ÷ total current liabilities

= $867÷ $2,778

= 0.32 times

For acid-test ratio

= Quick assets ÷ total current liabilities

where,

Quick assets = Total current assets - inventory

= $867 - $122

= $745

And the total current liabilities is $2,778

So, the acid-test ratio would be

= $745 ÷ $2,778

= 0.27 times