Calculating and interpreting short-term liquidity ratios. Data taken from the fi- nancial statements of International Paper Company, a forest products firm, appear as follows (amount 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 3, Year 4, and Year 5.

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

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For the Year Revenues... Cost of Goods Sold Net Income ... Cash Flow from Operations Year 3 Year 4 Year 5 $13,598 $13,685 $14,966 10,987 11,089 12,028 401 289 432 1,078 929 1.275 On December 31 Year 2 Year 3 Year 4 Year 5 Cash and Marketable Securities $ 238 $ 225 $ 242 $ 270 Accounts Receivable 1,841 1,861 1,856 2,241 Inventories 1,780 1,938 2,024 2,075 Prepayments 272 342 279 244 Total Current Assets. $4,131 $4,366 $4,401 $4,830 Accounts Payable $1,110 $1,259 $1,089 $1,204 Bank Loans 1,699 2,356 2,089 2,083 Other Current Liabilities 918 916 831 747 Total Current Liabilities. $3,727 $4,531 $4.009 $4,034