Financial information for The Buckle is presented in Appendix B at the end of the book. Required:
Question:
Required:
1. Calculate the current ratio for the past two years. Did the current ratio improve or weaken in the more recent year?
2. Calculate the acid-test (quick) ratio for the past two years. Did the acid-test ratio improve or weaken in the more recent year?
3. If The Buckle purchased $50 million of inventory by debiting Inventory and crediting Accounts Payable, how would its current ratio and acid-test ratio change? Show your calculations.
Step by Step Answer:
Requirement 1 in millions Total Current Assets Total Current Liabilities Curren...View the full answer
Financial Accounting
ISBN: 9780078110825
2nd Edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
Related Video
The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.
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