Selected Financial Data Regarding Current Assets and Current Liabilities for Two

question 115

Essay

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?

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