ACCOUNTING
1Company ABC has Net Working Capital of $1,500, current liabilities of $4000, and Inventory of $2,000. a.
What is the Current Ratio?
Net working Capital = Current Assets – Current Liabilities
1500 = Current Assets – 4000 → Current Assets = 4000 +1500 = 5500
Current Ratio = Current Assets/Current Liabilities = 5500/4000 = 1.375
b.
What is the Quick Ratio?
Quick Ratio = [Current Assets-Inventory] /Current Liabilities = (5500-2000)/5500 = 0.875
2-
Using information from Yahoo Finance, find the Current Ratio and Quick Ratio of the following companies a.
EXXON (XOM)
Current Assets
Cash And Cash equivalents
Short Term Investments
Net Receivable
Inventory
Dec 31, 2014
4,658,000
-
28,009,000
16,678,000
Other Current Assets 3,565,000
______________________________________
Total Current Assets 52,910,000
Current Liabilities
Accounts Payable
Short/Current Debt
Other Current Liabilities
47,165,000
17,468,000
-
______________________________________
Total Current Liabilities 64,633,000
Current Ratio = Current Assets/Current Liabilities = 52,910,000/64,633,000 = 0.8186
Quick Ratio = [Current Assets-Inventory] /Current Liabilities =
( 52,910,000 - 16,678,000) /64,633,000 = 0.5606 b.
British Petroleum (BP)
Current Assets
Cash And Cash equivalents
Short Term Investments
Net Receivable
Dec 31, 2014
29,786,000
329,000
31,875,000
Inventory 18,373,000
Other Current Assets 6,922,000
______________________________________
Total Current Assets 87,262,000

Current Liabilities
Accounts Payable
Short/Current Debt
Other Current Liabilities
49,231,000
10,566,000
3,818,000
______________________________________
Total Current Liabilities 63,615,000
Current Ratio = Current Assets/Current Liabilities = 87,262,000/63,615,000= 1.3717
Quick Ratio = [Current Assets-Inventory] /Current Liabilities =
( 87,262,000- 18,373,000) /63,615,000= 1.0829 c.
General Electric (GE)
Current Assets
Cash And Cash equivalents
Short Term Investments
Net Receivable
Dec 31, 2014
90,208,000
47,907,000
257,148,000
Inventory
Other Current Assets
17,689,000
-
______________________________________
Total Current Assets 412,952,000
Current Liabilities
Accounts Payable
Short/Current Debt
Other Current Liabilities
31,192,000
101,727,000
75,521,000
______________________________________
Total Current Liabilities 208,440,000
Current Ratio = Current Assets/Current Liabilities = 412,952,000/208,440,000= 1.9812
Quick Ratio = [Current Assets-Inventory] /Current Liabilities =
( 412,952,000 - 17,689,000) /208,440,000 = 1.8963 d.
Apple (AAPL)
Current Assets
Cash And Cash equivalents
Short Term Investments
Net Receivable
Inventory
Other Current Assets
Dec 31, 2014
13,844,000
11,233,000
31,537,000
2,111,000
9,806,000
______________________________________
Total Current Assets 68,531,000
Current Liabilities
Accounts Payable
Short/Current Debt
48,649,000
6,308,000
Other Current Liabilities 8,491,000
______________________________________
Total Current Liabilities 63,448,000
Current Ratio = Current Assets/Current Liabilities = 68,531,000/63,448,000= 1.0801
Quick Ratio = [Current Assets-Inventory] /Current Liabilities =
( 68,531,000- 2,111,000) /63,448,000= 1.0468

e.
PFIZER (PFE)
Current Assets
Cash And Cash equivalents
Short Term Investments
Net Receivable
Inventory
Other Current Assets
Dec 31, 2014
3,343,000
32,779,000
13,167,000
5,663,000
2,750,000
______________________________________
Total Current Assets 57,702,000
Current Liabilities
Accounts Payable
Short/Current Debt
7,466,000
5,141,000
Other Current Liabilities 9,024,000
______________________________________
Total Current Liabilities 21,631,000
Current Ratio = Current Assets/Current Liabilities = 57,702,000/21,631,000 = 2.6676
Quick Ratio = [Current Assets-Inventory] /Current Liabilities =
( 57,702,000 - 5,663,000) /21,631,000 = 2.4058
3Company XY has sales of $30 MM, total assets of $20 MM, total debt of $7MM. If profit margin is 8% a.
What is net income?
$30 MM * 8% = $2.4MM b.
What is ROA?
ROA = $2.4/$20= 12% c.
What is ROE?
Equity = $20 MM - $7 MM = $13 MM
ROE = $2.4/$13= 18.46%
4A company’s balance sheet is a reasonable reflection of the business that it is in. Following are some items of the common sized balance sheets of four companies that are in Car
Manufacturing, Pharmaceutical, Food and Beverages, and IT. Assign each company to one of these sectors:
Consider the balance sheet of some big companies from each sector for example Toyota (car manufacturing), Pfizer (Pharmaceutical), Coca Cola or Pepsi Cola (Food and Beverages), and
Apple (IT). Calculate the common size balance sheet for these companies and compare them to those below and assign a company to a sector that has similar numbers. Here is the assignment and some of the reasoning for it
Company A (car manufacturing) large plants and equipment, receivables since cars sit on show room floors before they are sold,
Company B (Pharmaceutical) Little cash, large goodwill,
Company C (IT) Not much plants and equipment, not much inventory,

Company D (Food and Beverages) large Plants and Equipment to produce the food and beverage at different places, not much receivables since food and beverages are consumed and do not sit on shelves for a long time
Common Sized Balance Sheet Company A Company B Company C Company D
Cash And Cash Equivalents
Net Receivables
Inventory
Goodwill
Property Plant and Equipment
4.93%
21.44%
4.57%
0.00%
18.44%
1.27%
8.12%
3.58%
24.71%
7.20%
19.67%
7.75%
0.21%
32.82%
3.39%
11.56%
5.41%
3.64%
13.67%
16.62%