Calculating and interpreting short-term liquidity ratios. Data taken from the financial statements of Nike, a designer and manufacturer of athletic footwear and apparel, appear as follows (amounts in millions):

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 Year 6, Year 7, and Year 8.

c. How has the short-term liquidity risk of Nike changed during the three-year period?

Transcribed Image Text:

For the Year Revenues Cost of Goods Sold Net Income Cash Flow from Operations Year 6 Year 7 Year 8 $6,471 $9,187 $9,153 3,907 5,503 6,066 553 796 498 340 323 518 On December 31 Year 5 Year 6 Year 7 Year 8 Cash and Marketable Securities. $ 216 $ 262 $ 445 $ 109 Accounts Receivable... 1,053 1,346 1,754 1,674 Inventories ... 630 931 1,339 1,397 Prepayments 147 188 293 353 Total Current Assets Accounts Payable Bank Loans Other Current Liabilities. $2,046 $2,727 $3,831 $3,533 $ 298 $ 455 $ 687 $ 585 397 445 553 480 412 567 627 639 Total Current Liabilities $1,107 $1,467 $1,867 $1,704