Question 8

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Quick Ratio

Smith and Sons, Inc. Income Statement
(in millions)	Current Year	Previous Year
Net sales	10,200	9,700
Cost of goods sold	(5,500)	(5,200)
Gross profit	4,700	4,500
Selling and administrative expenses	(2,800)	(2,700)
Income from operations	1,900	1,800
Interest expense	(300)	(250)
Income before income taxes	1,600	1,550
Income tax expense	(420)	(400)
Net income	1,180	1,150

Smith and Sons, Inc. Balance Sheet
(in millions)	Current Year	Previous Year
Assets
Current assets
Cash and cash equivalents	350	550
Accounts receivable	900	800
Inventory	650	800
Other current assets	400	250
Total current assets	2,300	2,400
Property, plant & equipment, net	2,450	2,350
Other assets	5,700	5,900
Total Assets	10,450	10,650
Liabilities and Stockholders' Equity
Current liabilities	3,150	3,050
Long-term liabilities	5,000	5,400
Total liabilities	8,150	8,450
Stockholders' equity-common	2,300	2,200
Total Liabilities and Stockholders' Equity	10,450	10,650

Calculate the quick ratio for Smith & Sons, Inc., for each year. Round answers to two decimal places.

Previous Year	Answer
Current Year	Answer