GẶP INC 1/30/99 GENERAL MOTORS (GM). 12/31/98 ($ in 000s) HOME DEPOT ORACLE 1/31/99 5/31/99 $1,871,824 $44,363,000 $4,933,000 $5,447,274 Current assets $1,553,103 $47,806,000 $2,857,000 $3,046,423 Current liabilities Source: Disclosure, Inc., Compact D/SEC, 2000. 1. _For each company listed above, compute the current ratio. Record your results below.. Current ratio: 1.21 2. The current ratios computed above åre primarily in the range (less than 1/1 through 3/3 through 5/ more than 5). 3. The company that has the strongest short-term liquidity as measured by the current ratio is (Gap Inc / GM/Home Depot / Oracle). 4. For the current ratio, a(n) (increasing/ decreasing) trend is generally considered favorable. 5. Current liabilities are usually paid off with current assets. The corporation not able to pay off all current liabilities at this time is (Gap Inc / GM/ Home Depot/ Oracle). Does this indicate the corporation is insolvent, or unable to pay its bills? (Yes / No) Explain. 6. A low current ratio generally indicates a lack of short-term liquidity. In general, such a firm will be required to pay (higher / lower) interest rates when borrowing money..

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Question
tivity 5
RATIO ANALYSIS
Current Ratio
· Understand the information provided by the current ratio.
Identify the expected range and whether an increasing or decreasing trend is usually
preferred.
arpose:
he current ratio compares current assets to current liabilities. This ratio measures the ability to pay current
ebts. It is a measure of short-term liquidity.
Current assets
CURRENT RATIO =
Current liabilities
GAP INC
1/30/99
GENERAL
MOTORS (GM).
12/31/98
($ in 000s)
HOM DΕΡΟΤ
1/31/99
ORACLE
5/31/99
Current assets
$1,871,824
$44,363,000
$4,933,000
$5,447,274
$1,553,103
$47,806,000
$2,857,000
$3,046,423
Current liabilities
Source: Disclosure, Inc., Compact D/SEC, 2000.
1. For each company listed above, compute the current ratio. Record your results below..
Current ratio:
1.21
2. The current ratios computed above åre primarily in the range
(less than 1/1 through 3 / 3 through 5 / more than 5).
3. The company that has the strongest short-term liquidity as measured by the çurrent ratio is
(Gap Inc / GM/Home Depot / Oracle).
4. For the current ratio, a(n) (increasing/ decreasing) trend is generally considered favorable.
5. Current liabilities are usually paid off with current assets. The corporation not able to pay off all current
liabilities at this time is (Gap Inc / GM/ Home Depot / Oracle).
Does this indicate the corporation is insolvent, or unable to pay its bills? (Yes / No) Explain.
6. A low current ratio generally indicates a lack of short-term liquidity. In general, such a firm will be
required to pay (higher / lower) interest rates when borrowing money..
Transcribed Image Text:tivity 5 RATIO ANALYSIS Current Ratio · Understand the information provided by the current ratio. Identify the expected range and whether an increasing or decreasing trend is usually preferred. arpose: he current ratio compares current assets to current liabilities. This ratio measures the ability to pay current ebts. It is a measure of short-term liquidity. Current assets CURRENT RATIO = Current liabilities GAP INC 1/30/99 GENERAL MOTORS (GM). 12/31/98 ($ in 000s) HOM DΕΡΟΤ 1/31/99 ORACLE 5/31/99 Current assets $1,871,824 $44,363,000 $4,933,000 $5,447,274 $1,553,103 $47,806,000 $2,857,000 $3,046,423 Current liabilities Source: Disclosure, Inc., Compact D/SEC, 2000. 1. For each company listed above, compute the current ratio. Record your results below.. Current ratio: 1.21 2. The current ratios computed above åre primarily in the range (less than 1/1 through 3 / 3 through 5 / more than 5). 3. The company that has the strongest short-term liquidity as measured by the çurrent ratio is (Gap Inc / GM/Home Depot / Oracle). 4. For the current ratio, a(n) (increasing/ decreasing) trend is generally considered favorable. 5. Current liabilities are usually paid off with current assets. The corporation not able to pay off all current liabilities at this time is (Gap Inc / GM/ Home Depot / Oracle). Does this indicate the corporation is insolvent, or unable to pay its bills? (Yes / No) Explain. 6. A low current ratio generally indicates a lack of short-term liquidity. In general, such a firm will be required to pay (higher / lower) interest rates when borrowing money..
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps

Blurred answer
Knowledge Booster
Ratio Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education