Caribou Coffee’s Cash Flow Statement Following is the current asset and current liability portion of the balance sheet for Caribou Coffee as of December 30, 2007, and December 31, 2006:

December 30, December 31, 2007 2006 Current assets:

Cash and cash equivalents $ 9,886,427 $ 14,752,269 Accounts receivable (net of allowance for doubtful accounts of $7,989 and $12,693 at December 30, 2007 and December 31, 2006, respectively) 3,116,864 1,663,139 Other receivables 1,544,281 1,769,256 Income tax receivable 149,304 —

Inventories 10,228,527 10,294,493 Prepaid expenses and other current assets 1,690,668 1,339,596 Total current assets $26,616,071 $29,818,753 Current liabilities:

Accounts payable $ 9,650,326 $ 9,681,879 Accrued compensation 7,863,445 5,676,449 Accrued expenses 9,318,442 7,518,379 Deferred revenue 9,987,724 9,002,588 Total current liabilities $36,819,937 $31,879,295 Required 1. Determine the company’s current ratio for each fi scal year. What do the ratios indicate about the liquidity of the company? What were the major causes for any changes in liquidity?

2. Explain why deferred revenue is considered a current liability on the company’s balance sheet.

AppendixLO1