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Liquidity ratio

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Financial Accounting, 4th Edition, Weygandt, Kieso, Kimmel

Solving Financial Accounting Problems Using Excel for Windows, Rex A Schildhouse

BYP4-10 Manitowoc Company and Caterpillar Corporation are both producers and sellers of large fixed assets. Caterpillar
is substantially larger than Manitowoc, Financial information taken from each company's financial statements is provided below.

Instructions

(a) Calculate the following liquidity ratios for the current year, and discuss the relative liquidity

of the two companies.

(1) Current ratio.

(2) Quick (acid-test) ratio.

(3) Current cash debt coverage.

(4) Accounts receivable turnover.

(5) Inventory turnover.

(b) Calculate the following profitability ratios for the current year, and discuss the relative

profitability of the two companies.

(1) Asset turnover.

(2) Profit margin on sales.

(3) Return on assets.

(4) Return on common stockholders' equity.

(c) Calculate the following solvency ratios for the current year, and discuss the relative solvency

of the two companies.

(1) Debt to assets.

(2) Times interest earned.

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Solution Summary

This shows how to determine liquidity ratio. The debt to assets for time interest earned are given.

$2.19