Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 13 - Financial Analysis: The Big Picture - Brief Exercises: BE13-10


Step1: Total current assets for the year 2007 102,464 dollars Total current assets for the year 2006 82,402 dollars Total current liabilities for the year 2007 201,183 dollars Total current liabilities for the year 2006 159,485 dollars Step2: Computation of Current ratio: CurrentRatio For the year2007= 102,464 dollars/201,183 dollars = 0.51:1 CurrentRatio For the year2006= 82,402 dollars/159,485 dollars = 0.52:1 Here the current ratios of 2006 and 2007 are 0.52:1 and 0.51:1 respectively. The current ratio is a more dependable indicator of liquidity than working capital. Bob Evans Farms 2006 current ratio of 0.52:1 means that for every dollar of current liabilities, Bob Evans Farms has $0.52 of current assets. Bob Evans Farms current ratio decreased in 2007.

Work Step by Step

Step1: Given data can be summarized Step2: Current ration can be calculated by using the formulae: CurrentRatio=Current Assets/Current Liabilities
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