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At the end of 2015, Apple had cash and short-term investments of $41.86 billion, accounts receivable...

At the end of 2015, Apple had cash and short-term investments of $41.86 billion, accounts receivable of $36.25 billion, current assets of $88.89 billion, and current liabilities of $80.39 billion. a. What was Apple's current ratio? b. What was Apple's quick ratio? c. What was Apple's cash ratio? d. At the end of 2015, HPQ had a cash ratio of 0.36, a quick ratio of 0.75 and a current ratio of 1.23. What can you say about the asset liquidity of Apple relative to HPQ?

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Expert Solution

(a) Current Assets = $ 88.89 billion and Current Liabilities = $ 80.39 billion

Current Ratio = Current Assets / Current LIabilities = 88.89 / 80.39 = 1.10573 ~ 1.11

(b) Cash and Short-Term Investments = $ 41.86 billion, Accounts Receivable = $ 36.25 billion

Quick Ratio = [(Cash & Short-Term Investments + Accounts Receivable) / Current LIabilities] = [(41.86 + 36.25) / 80.39] = 0.97164 ~0.97

(c) Cash and Short-Term Investments = $ 41.86 billion and Current Liabilities = $ 80.39 billion

Cash Ratio = Cash and Short-Term Investments / Current Liabilities = 41.86 / 80.39 = 0.52071 ~ 0.52

(d) HPQ has a lower cash ratio, quick ratio than Apple but a higher current ratio. This implies that HPQ has lower cash, short-term investments and accounts receivable as compared to Apple. Now, the aforementioned current assets are all moe liquid than other current asset items. Hence, it can be reliably inferred that Apple has more asset liquidity (possesses greater amount of assets with liquidity) as compared to HPQ eventhough the overall amount of Current Assets is greater for the latter.

jeff jeffy answered 1 year ago
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