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

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

Solutions

Expert Solution

Answer - Calculation of Current Ratio and Quick Ratio

Current Year Previous Year
1. Current Ratio
Current Assets = Cash and Cash equivalents+ Short term Investments + Accounts and Notes Receivable + Inventory + Prepaid expenses and other current assets =3661+2600+8265+1816+605 =3716+6901+7079+2422+896
                         16,947                                21,014
Current Liabilities = Short Term Obligations + Accounts Payable =323+7747 =3429+7631
                            8,070                                11,060
Current Ratio = Current Assets / Current Liabilities =16947 / 8070 =21014 / 11060
2.1 1.9
2. Quick Ratio
Quick Assets = Current Assets - Inventories - Prepaid expenses =16947-1816-605 =21014-2422-896
                         14,526                                17,696
Current Liabilities (Taking figure frm above)                             8,070                                11,060
Quick Ratio = Quick Assets / Current Liabilities =14526 / 8070 =17696 / 11060
1.8 1.6

ekkarill92 answered 1 year ago
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