Current Position Analysis Sherwood, Inc., the parent company of Tasty snack foods and Super beverages, had...

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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	$4,699	$5,111
Short-term investments, at cost	3,338	9,493
Accounts and notes receivable, net	10,611	9,736
Inventories	1,998	1,777
Prepaid expenses and other current assets	666	657
Short-term obligations	355	3,773
Accounts payable	8,525	8,397

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

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Answer 1

Answer #1

a
	Current Year	Previous Year
1. Current ratio	2.4	2.2
2. Quick ratio	2.1	2.0

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

Workings:
	Current Year	Previous Year
Cash and cash equivalents	4699	5111
Short-term investments, at cost	3338	9493
Accounts and notes receivable, net	10611	9736
Inventories	1998	1777
Prepaid expenses and other current assets	666	657
Total current assets	21312	26774

	Current Year	Previous Year
Cash and cash equivalents	4699	5111
Short-term investments, at cost	3338	9493
Accounts and notes receivable, net	10611	9736
Total quick assets	18648	24340

	Current Year	Previous Year
Short-term obligations	355	3773
Accounts payable	8525	8397
Total Current Liabilities	8880	12170

	Current Year	Previous Year
Total current assets	21312	26774
Divide by Total Current Liabilities	8880	12170
Current ratio	2.4	2.2

	Current Year	Previous Year
Total current assets	18648	24340
Divide by Total Current Liabilities	8880	12170
Quick ratio	2.1	2.0

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Answer 2

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