   Chapter 9, Problem 9.7E

Chapter
Section
Textbook Problem

Current position analysis PepsiCo. Inc. (PEP), the parent company of Frito-Lay™ snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of two recent years: a.Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place. b. What conclusions can you draw from these data?

To determine

Concept Introduction:

Current Ratio: Current ratio is the ratio of current assets with current liabilities it tells about the capability of a company to meet its daily expenses. Best current ratio is 2:1.

Quick Ratio: Quick ratio is the ratio of quick assets with current liabilities, it tells about the liquidity of the company/ business. Best possible quick ratio is 1:1.

Requirement-1:

To Calculate:

Current ratio and quick ratio.

Explanation
 Particulars Year 1 Year 2 Current Assets(A) 23031 20663 Current Liabilities (B) 17578 18092 Inventory (C) 2720 3143
To determine

Concept Introduction:

Current Ratio: Current ratio is the ratio of current assets with current liabilities it tells about the how much company strong to meet its day to day expenses. Best current ratio is 2:1.

Quick Ratio: Quick ratio is the ratio of quick assets with current liabilities it tells about the liquidity of the company/ business. Best possible quick ratio is 1:1.

Requirement-2:

To Indicate:

What Conclusion from above ratios?

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