Suppose the following financial data were reported by 3M Company (USA) for 2019 and 2020 (dollars in
Question:
Suppose the following financial data were reported by 3M Company (USA) for 2019 and 2020 (dollars in millions).
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 Statement of Financial Position (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 $ 4,897 $9,598 $5,839 Total current assets Current liabilities
Step by Step Answer:
a Current ratio 20199598 5839 1641 202010795 4897 2201 Working capital 201...View the full answer
Accounting Principles
ISBN: 978-1119419617
IFRS global edition
Authors: Paul D Kimmel, Donald E Kieso Jerry J Weygandt
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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