Question

Current Ratio
The following financial data is from Hi-Tech Instruments' financial statements (thousands of dollars, except earnings per share.)

2016
Sales revenue	$210,000
Cost of goods sold	125,000
Net income	8,300
Dividends	2,600
Earnings per share	4.15

Hi-Tech Instruments, Inc. Balance Sheet
(Thousands of Dollars)	Dec. 31, 2016	Dec. 31, 2015
Assets
Cash	14,300	$18,000
Accounts receivable (net)	42,000	41,000
Inventory	39,500	43,700
Total current assets	95,800	102,700
Plant assets (net)	52,600	50,500
Other assets	15,600	13,800
Total assets	164,000	$167,000
Liabilities and Stockholders' Equity
Notes payable-banks	$6,000	$6,000
Accounts payable	22,500	18,700
Accrued liabilities	16,500	21,000
Total current liabilities	45,000	45,700
9% Bonds payable	32,000	40,000
Total liabilities	77,000	85,700
Common stock, $25 par value (2,000,000 shares)	50,000	50,000
Retained earnings	37,000	31,300
Total stockholders' equity	87,000	81,300
Total liabilities and stockholders' equity	164,000	$167,000

Industry Average Ratios for Competitors
Quick ratio	1.3
Current ratio	2.4
Accounts receivable turnover	5.9 times
Inventory turnover	3.5 times
Debt-to-equity ratio	0.73
Gross profit percentage	42.8 percent
Return on sales	4.5 percent
Return on assets	7.6 percent

Calculate the company’s current ratio for 2016.

Round answer to one decimal place.

Answer

Compare the result to the industry average.

Hi-Tech Instruments' ratio is higher than the industry average.

Hi-Tech Instruments' ratio is lower than the industry average.

Answer 1

Answer- The company’s current ratio for 2016 =2.1 times.

Explanation- Current ratio for 2016 = Current assets/Current liabilities

= $95800/$45000

= 2.1 times

Hi-Tech Instruments' current ratio (ie- 2.1 times) is lower than the industry average (ie- 2.4 times).