Charlotte Foods Corporation manufactures and distributes prepared foods. Slidell, Inc. operates more than 300 restaurants located in 19 states. The following schedule lists the year-end current assets and current liabilities of these two firms for 2008 and 2009. Dollars are presented in thousands.

Required:
(a) Compute the following items for both companies for 2008 and 2009:
(1) Working capital
(2) Current ratio
(3) Quick ratio
(b) Given the data computed in part (a), which of these two companies had the stronger liquidity at the end of 2008 and at the end of 2009? Why?
(c) In your opinion, which of the three measures that you computed in part (a) is the best measure of liquidity? Explain.
(d) Review the data presented for each company. Are there any unusual items or unusual relationships in either company€™s data that a decision maker might want to investigate further? If so, identify these items and the issues or questions that decision makers would likely raise.

Transcribed Image Text:

Charlotte Foods Corporation Cash and Cash 2008 2009 Equivalents Short-term Marketable S157,558 $248,599 Securities Accounts Receivable Inventories Prepaid Expenses 14,862 11,360 218,487 228,369 220,494 213,456 6,431 S619,904 $708,215 8,503 Total Current Assets Accounts Payable Accrued Liabilitie:s Accrued Advertising Employee Compensation State and Local Taxes Dividends Payable Federal Income Taxes Current Portion of Long-Term Debt S98,357 $112,851 30,212 29,320 24,587 31,863 40,195 41,989 14,011 17,606 9,585 11,262 21,303 8,434 400 Total Current Liabilities $227,058 $264,917 Slidell Inc. Cash Investments Accounts Receivable Inventories Prepaid Expenses 2009 S8,241 6,699 1,399 12,545 15,445 19,063 20,384 3,514 $45,167 $47,441 2008 1,947 3,371 Total Current Assets Line of Credit Accounts Payable Dividends Payable Federal and State Taxes Accrued Wages & Fringe S 0 9,500 9,530 12,200 2,839 6,160 2,618 7,597 Benefits Other Accrued Liabilities 10,163 10,830 18,023 $47,093 $59,552 17,185 Total Current Liabilities