Suppose the following financial data were reported by 3M Company for 2019 and 2020 (dollars in millions).
Question:
Instructions
a. Calculate the current ratio and working capital for 3M for 2019 and 2020.
b. Suppose that at the end of 2020, 3M management used $200 million cash to pay off $200 million of accounts payable. How would its current ratio and working capital have changed?
ЗМ Company Balance Sheets (partial) 2020 2019 Current assets $ 3,040 Cash and cash equivalents Accounts receivable, net $1,849 3,250 3,195 Inventories 2,639 3,013 Other current assets 1,866 1,541 $10,795 $9,598 Total current assets $ 4,897 $5,839 Current liabilities
Step by Step Answer:
a Current ratio 20199598 5839 1641 202010795 4897 2201 Working ca...View the full answer
Accounting Principles
ISBN: 978-1119411482
13th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Related Video
The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.
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