Calculating Liquidity Ratios
The following schedule summarizes the composition of current assets and current liabilities reported in the year end balance sheets from Triangle Air Lines and Nazareth Steel:
|
Triangle Air Lines |
Nazareth Steel |
|
|
(Dollars in millions) |
||
|
Total current assets |
$2,821,920 |
$1,591,100 |
|
Inventories included in |
||
|
current assets |
0 |
852,500 |
|
Prepayment and supplies |
||
|
included in current assets |
586,751 |
6,500 |
|
Total current liabilities |
2,972,831 |
914,200 |
Required
a. Based on the information given here, determine each firm’s current ratio and quick ratio at the end of the year.
b. Which firm do you consider to be in better financial condition? Explain.