Quick Ratio
Calculate the quick ration for Smith& Sons Inc for 2015 and 2016 and comment on the company’sworking capital position. Did the company’s ability to pay itscurrent liabilities improve over the two years?
Quick ratio = (cash and cashequivalents + Short term investments + Accounts receivable)/CurrentLiabilities
| Smith & Sons,Inc |
| Balance Sheet |
| Decemober 31, 2016 and2015 |
| (In millions) | | 2016 | 2015 | |
| Assets | | | | |
| Current assets | | | | |
| Cash and cash equivalents | | 200 | 400 | |
| Accounts receivable | | 900 | 800 | |
| Inventory | | 500 | 650 | |
| Other Current assets | | 400 | 250 | |
| Total Current assets | | 2000 | 2100 | |
| | | | |
| Property, plant &equipment (net) | 2,600 | 2,500 | |
| Other Assets | | 5,700 | 5,900 | |
| Total assets | | 10,300 | 10,500 | |
| | | | |
| Labilities and Stockholders'eEquity | | | |
| Current Liabilites | | 3,000 | 2,900 | |
| Long-term liabilities | | 5,000 | 5,400 | |
| Total Labilities | | 8,000 | 8,300 | |
| Stockholders'sequity-common | 2,300 | 2,200 | |
| Total Labilities andStockholders' Equity | 10,300 | 10,500 | |
