Question

Key figures for the recent two years of both Apple and Google follow.

	Apple											Google
$ millions	Current Year					Prior Year						Current Year					Prior Year
Current assets		$	128,645				$	106,869					$	124,308				$	105,408
Current liabilities			100,814					79,006						24,183					16,756

Required
1. Compute current ratios for (a) Apple and (b) Google for the two years reported above.
2. In the current year, which company has the better ability to pay short-term obligations according to the current ratio?
3-a. Do Apple’s current ratio underperform or outperform the industry (assumed) average ratio of 2.0?
3-b. Do Google’s current ratio underperform or outperform the industry (assumed) average ratio of 2.0?

Answer 1

Answer 1

$ millions		Apple		Google
		Current Year	Prior Year	Current Year	Prior Year
Current assets	A	1,28,645	1,06,869	1,24,308	1,05,408
Current liabilities	B	1,00,814	79,006	24,183	16,756
Current Ratio	C=B/A	1.28	1.35	5.14	6.29

Answer 2  In the current year, Google has the better ability to pay short-term obligations according to the current ratio.

Answer 3-a Apple’s current ratio underperform the industry (assumed) average ratio of 2.0 as it is lower than 2.0.
3-b Google’s current ratio outperform the industry (assumed) average ratio of 2.0 as it is greator than 2.0.