Question

Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood 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	$3,371		$3,441
Short-term investments, at cost	2,394		6,391
Accounts and notes receivable, net	7,611		6,556
Inventories	1,584		2,111
Prepaid expenses and other current assets	528		781
Short-term obligations	282		2,988
Accounts payable	6,758		6,652

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

Answer 1

Answer: Current Assets: Cash and cash equivalents Short-term investments, at cost Accounts and notes receivable, net Inventories Prepaid expenses and other current assets Total Current Year Previous Year ($'s in millions) ($'s in millions) 3,371 3,441 2,394 6,391 7,611 6,556 1,584 528 781 15,488 19,280 2,111 Current Liabilities: Short-term obligations Accounts payable Current Year Previous Year ($'s in millions) ($'s in millions) 282 2,988 6,758 6,652 7,040 9,640 Total Current Ratio = Current Assets/Current Liabilities 2.20 2.00 Quick Ratio = (Current Assets-Inventory)/Current Liabilities 1.98 1.78