The following financial data were reported by 3M Company (USA) for 2009 and 2010 (dollars in millions).
Question:
Instructions
(a) Calculate the current ratio and working capital for 3M for 2009 and 2010.
(b) Suppose that at the end of 2010, 3M management used $200 million cash to pay off $200 million of accounts payable. How would its current ratio and working capital have changed?
2010 2009 Current assets Other current assets Inventories Accounts receivable, net Cash and cash equivalents Total current assets Current liabilities $ 2,068 $ 1,866 2,639 3,250 3,040 $10,795 $ 4,897 3,155 3,615 3,377 $12,215 $ 6,089
Step by Step Answer:
a Current ratio 201012215 6089 2011 200910795 4897 2201 Working capital 2...View the full answer
Financial Accounting IFRS
ISBN: 978-1118285909
2nd 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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