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1 February, 08:49

Airline Accessories has the following current assets: cash, $109 million; receivables, $101 million; inventory, $189 million; and other current assets, $25 million. Airline Accessories has the following liabilities: accounts payable, $112 million; current portion of long-term debt, $42 million; and long-term debt, $30 million. Based on these amounts, calculate the current ratio and the acid-test ratio for Airline Accessories.

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  1. 1 February, 12:48
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    The current ratio is 2.75

    The acid-test ratio is 1.36

    Explanation:

    In order to calculate the current ratio we would have to make the following calculatio:

    Current Ratio = Current Assets/Current Liabilities

    Current Assets = Cash + Receivables + Inventory + Other current assets

    = 109 + 101 + 189 + 25 = $424 million

    Current Liabilities = Accounts Payable + Current portion of long term debt = 112 + 42 = $154 million

    Therefore, current ratio=$424/$154

    current ratio = 2.75

    In order to calculate the acid-test ratio for Airline Accessories we would have to make the following calculation:

    Acid - Test Ratio = Cash + Receivables/Current Liabilities

    Acid - Test Ratio=$210/$154

    Acid - Test Ratio=1.36
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