Rimmel Financial Accounting 8e I Contact Us FUNDAMENTALS OF

Rimmel, Financial Accounting, 8e I Contact Us FUNDAMENTALS OF ACCOUNTING I (B Assignment Gradebook ORION Downloadable eTextbook CALCULATOR MESSAGE MY INSTRUCTOR FULL SCREEN PRINTER VERSION BACK xercise 2-11 Suppose the following data were taken 2017 and numbers, including share data, are in thousands.) tfromathie 2017 and 2016 financial statements of American Eagle outfiters. (Al 2017 2016 Current assets Total assets Current liabilities Total liabilities Net income Net cash provided by operating activities $867,300 $994,950 1,906,300 1,854,950 413,000 368,500 567,700 521,800 173,000 407,500 302,000 492,800 263,000 285,900 79,000 125,20o Capital expenditures Dividends paid on common stock 204,000 215,10o Weighted-average shares outstanding Calculate the current ratio for each year. (Round answers to 2 decimal places,e.o.15.25.) 2016 2017 Current ratio t/test/aglist.uniPid-asnmt2150480 N 10OF 1 en/shared/ SAMSUNG

Solution

Current Ratio = (Current Assets) ÷ (Current Liabilities)

In the question, Current Assets and Current Liabilities information is provided in detail.

Therefore,

Current ratio of 2016 = ($994,950 ) ÷ ($368,500 ) = 2.7:1

Current ratio of 2017 = ($867,300 ) ÷ ($413,000 ) = 2.1:1

The current ratio of 2.7:1 in the year 2016 represents that there are current assets which are 2.7 times of current liabilities.

The current ratio of 2.1:1 in the year 2017 represents that there are current assets which are 2.1 times of current liabilities. Though it has been decreased in 2017, 2:1 is the ideal current ratio, if current ratio is less than 2, it is a serious problem to the company.