Ratio Analysis Presented below are summary financial data from Pompeo’s annual report Amounts in millions Balance Sheet Cash and Cash Equivalents Marketable Securities Accounts Recelvable (net) Total Current Assets Total Assets $2,893 28,936 14,987 64,958 196,925 Current Liabilities Long-Term Debt Shareholders’ Equity 66,358 11,646 109,245 Income Statement Interest Expense Net income Before Taxes 896 39,114 Calculate the following ratios
Expert Answer
a. Times-interest-earned ratio 44.65 times
b. Quick ratio 0.71 to 1
c. Current ratio 0.98 to 1
Working:
Times interest earned ratio = EBIT/Interest = $40010/$896 = 44.65 times
EBIT = Net income before taxes + Interest = $39114 + $896 = $40010
Quick ratio = Quick assets/Current liabilities = ($2893 + $28936
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