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In December 2015​, Apple had cash of $37.98 billion, current assets of $76.66 billion, and current...

In December 2015​, Apple had cash of $37.98 billion, current assets of $76.66 billion, and current liabilities of $76.12 billion. It also had inventories of $2.45 billion.

a. What was​ Apple's current​ ratio?

b. What was​ Apple's quick​ ratio?

c. In January 2016​, ​Hewlett-Packard had a quick ratio of 0.66 and a current ratio of 0.90

What can you say about the asset liquidity of Apple relative to​Hewlett-Packard?

Solutions

Expert Solution

Current asset of Apple = $76.66 billion

Current liabilities of apple = $76.12 billion

Apple's Inventory = $2.45 billion

a. Apple's Current ratio = Current Assets/Current Liabilities = 76.66/76.12 = 1.01

b. Quick Ratio = (Current Assets - Inventory)/Current Liabilities = (76.66-2.45)/76.12 = 0.97

c. Asset Liquidity basically means how easily assets can be converted to cash and to payoff its debt.

Current Ratio and Quick ratio are the most important Liquidity ratio measure.

HP quick ratio = 0.66, HP's current ratio = 0.90

Apple's Quick ratio = 0.9749, Apple's Current ratio = 1.007094

We can clearly see that Apple's Quick ratio and current ratios, both are better than that of HP's Quick ratio and current ratio.

With respect to Quick ratio, Apple having a Quick Ratio of 0.9749 means that out of every $1, apple can afford $0.9749 dollars to pay off its debt. While for HP, out of every $1, HP can afford $0.66 to pay off its Debt. Hence, Apple's asset liquidity is better than that of Hewlett-Packard.

jeff jeffy answered 4 months ago
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