Homework SourseCurrent Position Analysis Sherwood Inc the parent company of
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:
a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place.
| 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 |
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 | |
