Question

Columbia Sportswear Company reported the following in recent balance sheets (amounts in millions). (in millions) September December 30, 2016 31, 2015 Assets Current Assets Cash $ 383 $ 460 Accounts Receivable 925 462 Inventories 1,125 680 Prepaid Rent 62 43 Total Current Assets 2,495 1,565 Software 337 176 Equipment 1,148 578 Total Assets $3,988 $2,319 Liabilities and Shareholders' Equity Liabilities Current Liabilities Accounts Payable $ 632 $ 536 Notes Payable (short-term) @ 2 Income Taxes Payable 60 5 Total Current Liabilities 692 543 Notes Payable (long-term) 94 Total Liabilities 833 637 Stockholders' Equity Common Stock 132 46 Retained Earnings 3,015 1,636 Total Shareholders' Equity 3, 147 1,682 Total Liabilities and Shareholders' Equity $3,988 $2,319 141 Required: 1. Calculate the current ratio at September 30, 2016 and December 31, 2015 2-a. Did the company's current ratio increase or decrease? 2-b. What does this imply about the company's ability to pay its current liabilities as they come due? 3-a. What would Cumberland's current ratio have been on September 30, 2016, if the company were to have paid down $10 of its Accounts Payable? 3-b. Does paying down Accounts Payable in this case increase or decrease the current ratio? 4. Are the company's total assets financed primarily by liabilities or stockholders' equity at September 30, 2016?

Answer 1

Req 1 Numerator Denominator Current Ratio Current Assets Current Liabilities $ $ Sept 30, 2016 2,495 692 Dec 31, 2015 1,565 543 $ $ 3.61 2.88 Req 2A Did the company's current ratio increase or decrease? Increase Req 2B What does this imply about the company's ability to pay its current liabilities as they come due? Increased ability to pay current liabilties Req 3A Current Ratio Numerator Denominator Current Assets Current Liabilities $ $ 2,485 682 3.64 Req 3B Does paying down Accounts Payable in this case increase or decrease the current ratio? Increase the current ratio Req 4 Are the company's total assets financed primary by liabilities or stockholders' equity at September 30,2016. Stockholders' Equity

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