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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
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 1Year 2
    Current Assets(A) 2303120663
    Current Liabilities (B) 1757818092
    Inventory (C) 27203143
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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