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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Short-Term Liquidity Ratios

The financial statements for Seek Enterprises, a retailer, follow.

Chapter 12, Problem 78E, Short-Term Liquidity Ratios The financial statements for Seek Enterprises, a retailer, follow. , example  1

Chapter 12, Problem 78E, Short-Term Liquidity Ratios The financial statements for Seek Enterprises, a retailer, follow. , example  2

Chapter 12, Problem 78E, Short-Term Liquidity Ratios The financial statements for Seek Enterprises, a retailer, follow. , example  3

Required:

1. Compute the four short-term liquidity ratios (rounded to two decimal places) for 2018 and 2019, assuming operating cash flows are S281 million and 5483 million, respectively.

2. CONCEPTUAL CONNECTION Indicate which ratios appear to be most appropriate for a retail organization. Indicate what other information you would like to know to comment on Seek’s short-term liquidity.

To determine

(a)

Introduction:

Short-term liquidity ratio are the ratios that tell about the short-term financial position of the firm.

To find:

Short-term liquidity ratios of seek enterprises.

Explanation

Current Ratio for 2019=Current AssetCurrent Liabilities

=$4,511$3,075

= 1.46:1

Current Ratio for 2018=Current AssetCurrent Liabilities

=$4,414$2,964

= 1.48:1

Quick Asset for 2019 = Cash + other asset + receivables

= $321 + $1,536 + $157

= $2,014

Quick asset for 2018 = $117 + $1,514 + $165

= $1,796

Quick Ratio for 2019=Quick AssetCurrent Liabilities

=$2,014$3,075

= 0.65:1

Quick Ratio for 2018=Quick AssetCurrent Liabilities

=$1,796$2,964

= 0.60:1

Cash Ratio for 2019=cash+shortterm investmentCurrent Liabilities

=$321+0$3,075

= 0

To determine

(b)

Introduction:

Short-term liquidity ratio are the ratios that tell about the short-term financial position of the firm.

To indicate:

Which ratio appears to be most appropriate for the organization and along with it indicate which information would you like to know to comment on the short-term liquidity ratio of the organization.

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