GF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial Financial Ratios. Following are the 2024 and 2023 comparative balance sheets for IGF. (The financial data we use are from actual financial statements of a well-known corporation, but the company name used is fictitious, and the numbers and dates have been modified slightly.) IGF FOODS COMPANY Comparative Balance Sheets Years Ended December 31, 2024 and 2023 ($ in millions) 2024 2023 Assets     Current assets:     Cash $ 48 $ 142 Accounts receivable 347 320 Marketable securities 358 – Inventories 914 874 Prepaid expenses 212 154 Total current assets $ 1,879 $ 1,490 Property, plant, and equipment (net) 2,592 2,291 Intangibles (net) 800 843 Other assets 74 60 Total assets $ 5,345 $ 4,684 Liabilities and Shareholders’ Equity     Current liabilities:     Accounts payable $ 254 $ 276 Accrued liabilities 493 496 Notes payable 518 115 Current portion of long-term debt 208 54 Total current liabilities $ 1,473 $ 941 Long-term debt 534 728 Deferred income taxes 407 344 Total liabilities $ 2,414 $ 2,013 Shareholders’ equity:     Common stock 180 180 Additional paid-in capital 21 63 Retained earnings 2,730 2,428 Total shareholders’ equity $ 2,931 $ 2,671 Total liabilities and shareholders’ equity $ 5,345 $ 4,684 Liquidity refers to a company’s cash position and overall ability to obtain cash in the normal course of business. A company is said to be liquid if it has sufficient cash or is capable of converting its other assets to cash in a relatively short period of time so that currently maturing debts can be paid. Required: Calculate the current ratio for IGF for 2024. The average ratio for the stocks listed on the New York Stock Exchange in a comparable time period was 1.5. Calculate IGF’s acid-test or quick ratio for 2024. The ratio for the stocks listed on the New York Stock Exchange in a comparable time period was 0.80.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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GF Foods Company is a large, primarily domestic, consumer foods company involved in the manufacture, distribution, and sale of a variety of food products. Industry averages are derived from Troy’s The Almanac of Business and Industrial Financial Ratios.

Following are the 2024 and 2023 comparative balance sheets for IGF. (The financial data we use are from actual financial statements of a well-known corporation, but the company name used is fictitious, and the numbers and dates have been modified slightly.)

IGF FOODS COMPANY
Comparative Balance Sheets Years Ended
December 31, 2024 and 2023
($ in millions) 2024 2023
Assets    
Current assets:    
Cash $ 48 $ 142
Accounts receivable 347 320
Marketable securities 358
Inventories 914 874
Prepaid expenses 212 154
Total current assets $ 1,879 $ 1,490
Property, plant, and equipment (net) 2,592 2,291
Intangibles (net) 800 843
Other assets 74 60
Total assets $ 5,345 $ 4,684
Liabilities and Shareholders’ Equity    
Current liabilities:    
Accounts payable $ 254 $ 276
Accrued liabilities 493 496
Notes payable 518 115
Current portion of long-term debt 208 54
Total current liabilities $ 1,473 $ 941
Long-term debt 534 728
Deferred income taxes 407 344
Total liabilities $ 2,414 $ 2,013
Shareholders’ equity:    
Common stock 180 180
Additional paid-in capital 21 63
Retained earnings 2,730 2,428
Total shareholders’ equity $ 2,931 $ 2,671
Total liabilities and shareholders’ equity $ 5,345 $ 4,684

Liquidity refers to a company’s cash position and overall ability to obtain cash in the normal course of business. A company is said to be liquid if it has sufficient cash or is capable of converting its other assets to cash in a relatively short period of time so that currently maturing debts can be paid.

Required:

  1. Calculate the current ratio for IGF for 2024. The average ratio for the stocks listed on the New York Stock Exchange in a comparable time period was 1.5.

  2. Calculate IGF’s acid-test or quick ratio for 2024. The ratio for the stocks listed on the New York Stock Exchange in a comparable time period was 0.80.

 

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