Quick Ratio Calculate the quick ratio for Los Altos, Inc., for both years, using the financial statements displayed below. Round to nearest hundredth. 2020 2019 Quick Ratio Did the company’s ability to pay its current liabilities improve over the two years? Answer Los Altos, Inc. Income Statement For Years Ended December 31, 2020 and 2019 (in millions) 2020 2019 Net sales $5,500 $5,225 Cost of goods sold 2,750 2,600 Gross profit 2,750 2,625 Selling and administrative expenses 1,400 1,350 Income from operations 1,350 1,275 Interest expense 150 125 Income before income taxes 1,200 1,150 Income tax expense 210 200 Net income $990 $950 Los Altos, Inc. Balance Sheet December 31, 2020 and 2019 (in millions) 2020 2019 Assets Current assets Cash and cash equivalents $100 $200 Accounts receivable 450 400 Inventory 250 325 Other current assets 200 125 Total current assets 1,000 1,050 Property, plant, & equipment (net) 1,300 1,250 Other assets 2,850 2,950 Total assets $5,150 $5,250 Liabilities and Stockholders' Equity Current liabilities $1,800 $1,740 Long-term liabilities 3,000 3,240 Total liabilities 4,800 4,980 Stockholders' equity - common 350 270 Total Liabilities and Stockholders' Equity $5,150 $5,250

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ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Quick Ratio

Calculate the quick ratio for Los Altos, Inc., for both years, using the financial statements displayed below. Round to nearest hundredth.

	2020	2019
Quick Ratio

Did the company’s ability to pay its current liabilities improve over the two years? Answer

Los Altos, Inc.
Income Statement
For Years Ended December 31, 2020 and 2019
(in millions)	2020	2019
Net sales	$5,500	$5,225
Cost of goods sold	2,750	2,600
Gross profit	2,750	2,625
Selling and administrative expenses	1,400	1,350
Income from operations	1,350	1,275
Interest expense	150	125
Income before income taxes	1,200	1,150
Income tax expense	210	200
Net income	$990	$950

Los Altos, Inc.
Balance Sheet
December 31, 2020 and 2019
(in millions)	2020	2019
Assets
Current assets
Cash and cash equivalents	$100	$200
Accounts receivable	450	400
Inventory	250	325
Other current assets	200	125
Total current assets	1,000	1,050
Property, plant, & equipment (net)	1,300	1,250
Other assets	2,850	2,950
Total assets	$5,150	$5,250
Liabilities and Stockholders' Equity
Current liabilities	$1,800	$1,740
Long-term liabilities	3,000	3,240
Total liabilities	4,800	4,980
Stockholders' equity - common	350	270
Total Liabilities and Stockholders' Equity	$5,150	$5,250