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In: Accounting

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

4.

Accounts Receivable Analysis

Xavier Stores Company and Lestrade Stores Inc. are large retail department stores. Both companies offer credit to their customers through their own credit card operations. Information from the financial statements for both companies for two recent years is as follows (in millions):

Xavier Lestrade
Sales $8,500,000 $4,585,000
Credit card receivables—beginning 820,000 600,000
Credit card receviables—ending 880,000 710,000

a. Determine the (1) accounts receivable turnover and (2) the number of days' sales in receivables for both companies. Round your calculations and answers to one decimal place. Assume 365 days a year.

Xavier Lestrade
1. Accounts receivable turnover
2. Number of days' sales in receivables days days

b. Xavier's accounts receivable turnover is much   than Lestrade's. The number of days' sales in receivables is   for Xavier than for Lestrade. These differences indicate that Xavier is able to turn over its receivables   quickly than Lestrade. As a result, it takes Xavier   time to collect its receivables.

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Expert Solution

ekkarill92 answered 1 year ago
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