RATIO ANALYSIS Consider the following information taken from Green Mountain Coffee Roaster’s

(GMCR’s) financial statements:

September 30 (in thousands)

2006 2005 Current assets:

Cash and cash equivalents $ 1,274 $ 6,450 Receivables 30,071 16,548 Inventories 31,796 14,072 Other current assets 4,818 2,620 Total current assets $67,959 $39,690 Current liabilities:

Current portion of long-term debt $ 97 $ 3,530 Accounts payable 23,124 11,228 Accrued compensation costs 5,606 1,929 Accrued expenses 9,108 5,054 Other current liabilities 874 777 Total current liabilities $38,809 $22,518 Also, Green Mountain Coffee Roaster’s operating cash flows were $12,829 and

$14,874 in 2006 and 2005, respectively.

Required:

. Calculate GMCR’s current ratio for 2006 and 2005.

. Calculate GMCR’s quick ratio for 2006 and 2005.

. Calculate GMCR’s cash ratio for 2006 and 2005.

. Calculate GMCR’s operating cash flow ratio for 2006 and 2005.

. Provide some reasons why GMCR’s liquidity may be considered to be improving and some reasons why it may be worsening.

Problem Set B