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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 $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   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.

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 =5228+3714+11804+1353+451 =5451+10123+10382+1805+667
22520                                28428
Current Liabilities = Short Term Obligations + Accounts Payable = 361+8659 =3832+8528
9020                                12360
Current Ratio = Current Assets / Current Liabilities =22520/9020 =28428/12360
2.49 2.3
2. Quick Ratio
Quick Assets = Current Assets - Inventories - Prepaid expenses =22520-1353-451 =28428-1805-667
20716 25956
Current Liabilities (Taking figure frm above) 9020                                12360
Quick Ratio = Quick Assets / Current Liabilities =20716/9020 =25956/12360
2.29 2.1

ekkarill92 answered 2 years ago
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