Question

Question 5
The Cola Company reported the following comparative information at December 31, 2017, and December 31, 2016 (amounts in millions and adapted):
2017 2016
Current Assets $21,579 $17,552
Total Assets 72,921 48,671
Current Liabilities 18,508 13,721
Total Shareholder Equity 31,317 25,346
Net Sales 35,119 30,990
Net Income 11,809 6,824

Requirements
1. Calculate the following ratios for 2017 and 2016: a. Current ratio b. Debt ratio
2. At the end of 2017, The Cola Company issued $1,590 million of long-term debt that was used to retire short-term debt. What would the current ratio and debt ratio have been if this transaction had not been made

Answer 1

1)
Year			Current Ratio
	Current Assets	/	Current Liabilities	=	Current Ratio
2017	$ 21,579	/	$ 18,508	=	1.17
2016	$ 17,552	/	$ 13,721	=	1.28
			Debt Ratio
	Total Liabilities (Total Assets (-) Equity )	/	Total Assets	=	Debt Ratio
2017	$ 41,604 ( $ 72,921 (-) $ 31,317 )	/	$ 72,921	=	0.57
2016	$ 23,325 ( $ 48,671 (-) $ 25,346 )	/	$ 48,671	=	0.48

2)

2017 :

Current Ratio    = Current Assets   / Current Liabilities                                =   $ 21,579 / ( $ 18,508 + $ 1,590 )                                =   $ 21,579 / $ 20,098                                =    1.07

Current Ratio    = 1.07

Debt ratio    =   Total Liabilities / Total Assets                          =   ( $ 72,921 (-) $ 31,317 + $ 1,590 (-) $ 1,590 ) / $ 72,921                          =    $ 41,604 / $ 72,921                          = 0.57

Debt Ratio    = 0.57