Determine the current ratio and quick ratio


Response to the following problem:

Tommy Hilfiger Corp., the fashion apparel company, had the following current assets and current liabilities at the end of two recent years:

                                                               March 31, 2004                                 March 31, 2003

                                                                   (in millions)                                         (in millions)

Cash and cash equivalents                              $414.5                                                  $420.8

Temporary investments                                   27.5                                                       -

Accounts receivable                                        188.5                                                     185.0

Inventories                                                   206.3                                                     229.7

Deferred tax and other current assets             92.8                                                       80

Short-term borrowings                                    -                                                           19.4

Current portion of long-term debt                   0.7                                                          151.9

Accounts payable                                           32.7                                                       47.8

Accrued expenses and other current liabilities    207.2                                                     185.9

a. Determine the (1) current ratio and (2) quick ratio for both years. Round to two decimal places. Treat the deferred tax and other current assets as nonquick assets.

b. What conclusions can you draw from these data?

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Financial Accounting: Determine the current ratio and quick ratio
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