12

Quick Ratio

Calculate the quick ratio for Los Altos, Inc., for both years, using the financial statements displayed below. Round to nearest hundredth.

	2020	2019
Quick Ratio

Did the companys ability to pay its current liabilities improve over the two years? yes or no?

Los Altos, Inc.
Income Statement
For Years Ended December 31, 2020 and 2019
(in millions)	2020	2019
Net sales	$13,000	$12,350
Cost of goods sold	6,600	6,240
Gross profit	6,400	6,110
Selling and administrative expenses	3,360	3,240
Income from operations	3,040	2,870
Interest expense	360	300
Income before income taxes	2,680	2,570
Income tax expense	504	480
Net income	$2,176	$2,090

Los Altos, Inc.
Balance Sheet
December 31, 2020 and 2019
(in millions)	2020	2019
Assets
Current assets
Cash and cash equivalents	$240	$480
Accounts receivable	1,080	960
Inventory	600	780
Other current assets	480	300
Total current assets	2,400	2,520
Property, plant, & equipment (net)	3,120	3,000
Other assets	6,840	7,080
Total assets	$12,360	$12,600
Liabilities and Stockholders' Equity
Current liabilities	$4,200	$4,060
Long-term liabilities	7,000	7,560
Total liabilities	11,200	11,620
Stockholders' equity - common	1,160	980
Total Liabilities and Stockholders' Equity	$12,360	$12,600