3M Company reported the following financial data for 2004 and 2003 ($ in and after paying accounts millions).

payable.

(SO 7)

3M COMPANY Balance Sheet (partial)

2004 2003 Current assets Cash and cash equivalents $2,757 $1,836 Accounts receivable, net 2,792 2,714 Inventories 1,897 1,816 Other current assets 1,274 1,354 Total current assets $8,720 $7,720 Current liabilities $6,071 $5,082 Instructions

(a) Calculate the current ratio for 3M for 2004 and 2003.

(b) Suppose that at the end of 2004 3M management used $300 million cash to pay off

$300 million of accounts payable. How would its current ratio change?

Exercises 5 1 5