Current Ratio (2 of 2)
• What is the current ratio for 2016 for Boswell?
Current Ratio = $643.5m ÷ $288.0m = 2.23 times
• The firm had $2.23 in current assets for every $1 it
owed in current liability. It is better than peer group
average of $1.80.
Acid²Test (Quick) Ratio (1 of 2)
• Acid-Test (Quick) Ratio excludes the inventory
from current assets as inventory may not be very
liquid.
Acid-Test
Current Assets
Inventory
=
(or Quick) Ratio
Current Liabilities
Acid²Test (Quick) Ratio (2 of 2)
• What is the quick ratio for Boswell?
• Acid Test (or Quick) Ratio
= ($643.5m $378m) ÷ ($288.0m) = 0.92 times
• The firm has only $0.92 in current assets (less
inventory) to cover $1 in current liabilities. This
ratio is worse than peer average of $0.94