Calculating and interpreting short-term liquidity ratios Data taken from the financial statements of Nestl, a consumer Foods

Calculating and interpreting short-term liquidity ratios Data taken from the financial statements of Nestlé, a consumer Foods Company headquartered in Switzerland, appear as follows (amounts in millions of euros):

a. Compute the current and quick ratios on December 31 of each year

b. Compute the cash flow from operations to current liabilities ratio and the accounts receivable, inventory, and accounts payable turnover ratios for 2005, 2006, and 2007.

c. How has the short-term liquidity risk of Nestlé changed during the three-yearperiod?

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2005 For the Year 2006 2007 Revenues.... €89,625 €78,533 €73,135 Cost of Goods Sold 37,530 32,474 30,435 Net Income .. 6,498 8,874 7,277 Cash Flow from Operatians. 11,030 9,197 8,461 On December 31 2006 2005 2004 2007 € 5,737 € 9,887 € 7,129 Cash and Marketable Securities. €11,188 Accounts Receivable... 7,640 9,316 9,056 9,193 Inventories . 4,545 4,988 5,250 5,602 Prepayments . 1,234 955 760 756 Tatal Current Assets. €22,828 € 5,871 €21,610 €21,933 €26,865 Accounts Payable . Bank Loans .. € 8,566 € 7,810 € 7,151 14,826 9,626 12,120 9,525 Other Current Liabilities. 2,783 2,742 3,792 3,415 Total Current Liabilities €26,175 €20,178 €23,063 €18,811