Question

Suppose the following data were taken from the 2017 and 2016 financial statements of American Eagle Outfitters. (All numbers, including share data, are in thousands.) 2017 2016 Current assets $ 924,000 $953,100 Total assets 1,940,000 1,869,000 Current liabilities 420,000 353,000 Total liabilities 554,840 534,534 Net income 177,480 321,000 Net cash provided by operating activities 298,000 485,700 Capital expenditures 259,000 279,500 Dividends paid on common stock 79,000 113,900 Weighted-average shares outstanding 204,000 214,000 (a) Calculate the current ratio for each year. (Round answers to 2 decimal places, e.g. 15.25.) 2017 2016 Current ratio enter the ratio rounded to 2 decimal places : 1 enter the ratio rounded to 2 decimal places : 1

Answer 1

Answer:

Current ratio for 2017 year is 2.20 times

Current ratio for 2016 year is 2.70 times

Explanation:

Current Ratio: It is a short term ratio that shows a relationship between current assets and the current liabilities to meet short term obligations of the business organization.

The formula to compute the current ratio is shown below:

Current Ratio = Current assets ÷ current liabilities

For 2017,  

The current ratio = $924,000 ÷ $420,000

                            = 2.20 times

For 2016,  

The current ratio = $953,100 ÷ $353,000

                            = 2.70 times