Ratio Analysis Presented below are summary financial data fr

Ratio Analysis Presented below are summary financial data from Pompeo\'s annual report Amounts in millions Balance Sheet Cash and Cash Equivalents Marketable Securities Accounts Receivable (net) Total Current Assets Total Assets $1,865 19,100 9,367 39,088 123,078 Current Liabilities Long-Term Debt Shareholders\' Equity 39,255 7,279 68,278 Income Statement Interest Expense Net Income Before Taxes 375 14,007 Calculate the following ratios: (Round to 2 decimal points) a. Times-interest-earned ratio b. Quick ratio c. Current ratio

Solution

Part A

Times interest earned ratio = (net income before taxes + interest expense) / interest expense = (14007+375) /375 = 38.35 times

Part B

Quick ratio = (cash and cash equivalents+ marketable securities+ accounts receivable)/ current liabilities = (1865+19100+9367) / 39255 = 0.77

Part C

Current ratio = current assets / current liabilities = 39088/39255 = 0.995 = 1.00