Current Ratio Smith and Sons, Inc. Income Statement ( in millions) Current Year Previous Year Net sales S 10, 150 $9, 650 Cost of goods sold (5,500) (5,200) Gross profit 4, 650 4, 450 Selling and administrative expenses (2,800) (2,700) Income from operations 1,850 1,750 interest expense (300) (250) Income before income taxes 1,550 1, 500 Income tax expense (420) (400) Net income 1,130 1,100 Smith and Sons, Inc. Balance Sheet (in millions) Current Year Previous Year Assets Current assets Cash and cash equivalents. 300 500 Accounts receivable 900 800 Inventory 600 750 Other current assets 400 250 Total current assets 2,200 2,300 Property, plant & equipment, net 2,500 2,400 Other assets 5, 700 5,900 Total Assets 10, 400 10,600 Liabilities and Stockholders Equity Current liabilities 3, 100 3,000 Long-term liabilities 5,000 5, 400 Total liabilities 8, 100 8,400 Stockholders' equity common 2,300 2,200 Total Liabilities and Stockholders' Equity 10, 400 10, 600 Calculate the current ratio for Smith & Sons, Inc., for each year. Round answers to two decimal places. Previous Year Answer Current Year Answer Did the company's ability to pay its current liabilities improve over the two years? The decrease in ratio indicates that Smith & Son's ability to pay its current liabilities improved. The increase in ratio indicates that Smith & Son's ability to pay its cument liabilities declined. The decrease in ratio indicates that Smith & Son's ability to pay its current liabilities declined. The increase in ratio indicates that Smith & Son's ability to pay its current liabilities improved.
Son's ability to pay its current liabilities improved.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
