Question

In: Accounting

Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had...

Current Position Analysis

Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had the following current assets and current liabilities at the end of two recent years:

Current Year
(in millions) Previous Year
(in millions)
Cash and cash equivalents $5,228 $5,451
Short-term investments, at cost 3,714 10,123
Accounts and notes receivable, net 11,804 10,382
Inventories 1,353 1,805
Prepaid expenses and other current assets 451 667
Short-term obligations 361 3,832
Accounts payable 8,659 8,528

a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place.

Current Year Previous Year
1. Current ratio
2. Quick ratio

b. The liquidity of Sherwood has increased  some over this time period. Both the current and quick ratios have increased . Sherwood is a strong  company with ample  resources for meeting short-term obligations. Its liquidity as measured by the current and quick ratios has improved  during this period.

Solutions

Expert Solution

Ans- a-1-Computation of Current assets and Current liabilities:-

Current Year Previous Year
Current Assets:
Cash and cash equivalent $5,228 $5,451
Short-term investments 3,714 10,123
Accounts receivables 11,804 10,382
Inventories 1,353 1,805
Prepaid expenses and other current assets 451 667
Total Current assets 22,550 28,428
Current Liability:
Short -term obligations 361 3,832
Accounts Payable 8,659 8,528
Total current liability 9,020 12,360

Current Ratio= Current Assets/ Current Liabilities

Current year= $22,550/ $9,020

=2.5

Previous year= $28,428/ $12,360

=2.3

Ans-a-2- Computation of Quick Assets and Current Liabilities

Current Year Previous Year
Quick Assets:
Cash and cash equivalent $5,228 $5,451
Short-term investments 3,714 10,123
Accounts receivables 11,804 10,382
Total Quick assets 20,746 25,956
Current Liability:
Short -term obligations 361 3,832
Accounts Payable 8,659 8,528
Total current liability 9,020 12,360

Quick assets= Current assets not including Inventory and Prepaid expenses.

Quick Ratio= Quick Assets/ Current Liabilities

Current Year= $20,746/ $9,020

=2.3

Previous Year= $25,956/ $12,360

=2.1

Ans-b- Both current ratio and quick ratio improved during the current year (year-2).

Current ratio 2:1 is considered to be in par with standards and a quick ratio of 1: 1 is best.

So comparison actual ratio with these standards indicate, current ratio the measure of liquidity is at above the required standard. It seems that firm is having good control over inventory and prepaid expenditure.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had...
Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions) Previous Year (in millions) Cash and cash equivalents $5,228 $5,451 Short-term investments, at cost 3,714 10,123 Accounts and notes receivable, net 11,804 10,382 Inventories 1,353 1,805 Prepaid expenses and other current assets 451 667 Short-term obligations 361 3,832 Accounts payable 8,659 8,528 a. Determine the (1)...
Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had...
Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions) Previous Year (in millions) Cash and cash equivalents $3,661 $3,716 Short-term investments, at cost 2,600 6,901 Accounts and notes receivable, net 8,265 7,079 Inventories 1,816 2,422 Prepaid expenses and other current assets 605 896 Short-term obligations 323 3,429 Accounts payable 7,747 7,631 a. Determine the (1)...
3. Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages,...
3. Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions) Previous Year (in millions) Cash and cash equivalents $1,692 $1,502 Short-term investments, at cost 1,202 2,790 Accounts and notes receivable, net 3,820 2,862 Inventories 2,798 3,730 Prepaid expenses and other current assets 932 1,380 Short-term obligations 298 3,168 Accounts payable 7,162 7,052 a. Determine the...
Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had the following current...
Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions) Previous Year (in millions) Cash and cash equivalents $4,622 $5,011 Short-term investments, at cost 3,283 9,307 Accounts and notes receivable, net 10,435 9,546 Inventories 2,751 1,834 Prepaid expenses and other current assets 917 678 Short-term obligations 367 3,894 Accounts payable and other current liabilities 8,684 7,938 Income taxes payable...
Current Position Analysis Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had...
Current Position Analysis Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions)Previous Year (in millions) Cash and cash equivalents$2,544 $2,722 Short-term investments, at cost1,807 5,054 Accounts and notes receivable, net5,745 5,184 Inventories1,893 1,261 Prepaid expenses and other current assets631 467 Short-term obligations252 2,678 Accounts payable6,058 5,962 a. Determine the (1) current ratio and (2) quick ratio for both...
Current Position Analysis Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had...
Current Position Analysis Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions)Previous Year (in millions) Cash and cash equivalents$2,544 $2,722 Short-term investments, at cost1,807 5,054 Accounts and notes receivable, net5,745 5,184 Inventories1,893 1,261 Prepaid expenses and other current assets631 467 Short-term obligations252 2,678 Accounts payable6,058 5,962 a. Determine the (1) current ratio and (2) quick ratio for both...
Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current...
Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions) Previous Year (in millions) Cash and cash equivalents $2,485 $2,671 Short-term investments, at cost 1,765 4,961 Accounts and notes receivable, net 5,610 5,088 Inventories 1,305 580 Prepaid expenses and other current assets 435 215 Short-term obligations 232 2,465 Accounts payable 5,568 5,485 a. Determine the (1) current ratio and...
PepsiCo, Inc., the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current...
PepsiCo, Inc., the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions) Previous Year (in millions) Cash and cash equivalents $6,297 $4,067 Short-term investments, at cost 322 358 Accounts and notes receivable, net 7,041 6,912 Inventories 3,581 3,827 Prepaid expenses and other current assets 1,479 2,277 Short-term obligations 4,815 6,205 Accounts payable 12,274 11,949 a. Determine the (1) current ratio and...
Tasty Snacks, Inc., a regional snack foods company (corn chips, potato chips, etc.) in the northeast,...
Tasty Snacks, Inc., a regional snack foods company (corn chips, potato chips, etc.) in the northeast, is considering two alternative proposals for expansion into southeastern states. Alternative 1: Construct a single plant in Chattanooga, Tennessee with a monthly production capacity of 250,000 cases, a monthly fixed cost of $265,000, and a variable cost of $45 per case. Alternative 2: Construct three plants, one each in Birmingham, Alabama, Tallahassee, Florida, and Charlotte, North Carolina, with capacities of 100,000, 80,000 and 70,000,...
Answer this fully please PepsiCo, Inc. (PEP), the parent company of Frito-Lay snack foods and Pepsi...
Answer this fully please PepsiCo, Inc. (PEP), the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of two recent years: Current Year (in millions) Previous Year (in millions) Cash and cash equivalents $9,158 $9,096 Short-term investments, at cost 6,967 2,913 Accounts and notes receivable, net 6,694 6,437 Inventories 2,723 2,720 Prepaid expenses and other current assets 1,547 1,865 Short-term obligations 6,892 4,071 Accounts payable 14,243 13,507 a. Determine...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT