At the end of 2015, apple had cash and short-term investments of $41.39billion, accounts receivable of $35.97billion, current assets of $ 89.75billion, and current liabilities of $ 80.59billion. a. what was apple's current ratio? b. what was apple's quick ratio? c. what was apple's cash ratio? d. at the end of 2015, hpq had a cash ratio of 0.38, a quick ratio of 0.73 and a current ratio of 1.19. what can you say about the asset liquidity of apple relative tohpq?

(a) 1.11

(b) 0.96

(c) 0.51

(d) Apple has more liquidity than HPQ.

Explanation:

(a) Current Ratio :

Current ratio is a liquidity ratio, which measures the firm’s ability to pay off its short-term obligations.

Current Ratio = Current Assets ÷ Current Liabilities

Apple’s current ratio:

= $89.75 ÷ $80.59

= 1.11

(b) Quick Ratio :

Quick ratio is more stringent measure of liquidity. It does not include inventory and other assets that are not liquid.

Quick ratio = (cash + marketable securities + receivables) ÷ current liabilities

Apple’s quick ratio:

= ($41.39 + $35.97) ÷ $80.59

= 0.96

(c) Cash ratio

Cash ratio is a conservative liquidity measure.

Cash ratio = (cash+ marketable securities) ÷ current liabilities

Apple’s cash ratio:

= $41.39 ÷ $80.59

= 0.51

(d) Apple has more liquidity than HPQ.

Though the current ratio of both the companies is the same, Apple has a higher quick ratio and cash ratio.

The reason is because HPQ has a high amount of inventory. Apple is more equipped to meet its short-term obligations.

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