Current Position Analysis Sherwood, Inc., had the following current assets and c
ID: 2522972 • Letter: C
Question
Current Position Analysis Sherwood, Inc., had the following current assets and current liabilities at the end of two recent years: Year 2 Year 1 (in millions) (in millions) Cash and cash equivalents Short-term investments, at cost Accounts and notes receivable, net Inventories Prepaid expenses and other current assets Short-term obligations (liabilities) Accounts payable and other current liabilities $4,038 2,868 9,117 2,861 954 305 7,226 $4,170 7,743 7,942 3,814 1,411 3,240 6,604 a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place. Year 2 Year 1 Current ratio Quick ratio b. What conclusion can be drawn from these data?Explanation / Answer
Answer:
1-a)
Year 2
Year 1
CURRENT RATIO
2.63
2.55
Curretn assets/ current liabelity
19838/7531
25080/9844
Working notes for the above answer is as under
CURRENT ASSETS
Year 2
Year 1
Cash and Cash Equivalents
4,038
4,170
Short Term Investments at Cost
2,868
7,743
Accounts and Notes Receivable, Net
9,117
7,942
Inventory
2,861
3,814
Prepaid expenses and other current assets
954
1,411
TOTAL CURRENT ASSETS
19,838
25,080
CURRENT LIABILITIES
Short Term Obligations - See Note below
305
3,240
Accounts Payable and Other Current Liabilities
7,226
6,604
TOTAL CURRENT LIABILITIES
7,531
9,844
1-b)
Year 2
Year 1
Quick Ratio
2.254
2.160
Working
Year 2
Year 1
Quick Ratio (A/B)
2.254
2.160
CURRENT ASSETS-inventory (A)
16,977
21,266
CURRENT LIABILITIES (B)
7,531
9,844
____________________________
2
Company has sufficient current assets balance to pay its current liableity in both the year
Year 2
Year 1
CURRENT RATIO
2.63
2.55
Curretn assets/ current liabelity
19838/7531
25080/9844
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