Question

The following table contains current asset and current liability balances for Deere and Company​(DE):  
a.  Measure the liquidity of Deere​ & Co. for each year using the​ company's net working capital and current ratio.

b.  Is the trend in​ Deere's liquidity improving over this​ period?

​ ($ thousands)	2013		2012		2011
Current assets
Cash and cash equivalents	2,181,000		2,177,600		1,624,900
​ Short-term investments	0		1,626,900		0
Net receivables	3,979,600		3,753,300		3,593,600
Inventory	3,007,800		2,259,400		1,846,100
Total current assets	9,168,400		9,817,200		7,064,600
Current liabilities
Accounts payable	6,591,500		3,132,000		4,762,400
​ Short-term/current long-term debt	8,544,900		9,990,100		8,154,200
Other current liabilities	0		2,836,500		0
Total current liabilities	15,136,400		15,958,600		12,916,600

Answer 1

a.

Liquidity ratios are a measure of how well a company is able to meet its day to day cash flows and obligations.

Net working capital is simply calculated as:

And, current ratio is calculated as:

Below table shows the computation of all 3 periods:

b.

The company's liquidity position has remained almost the same during the 3 year period. Neither its current ratio or net working capital have changed significantly.