SHORT-TERM LIQUIDITY RATIOS The financial statements for Retail Corporation appear below.

Retail Corporation Consolidated Results of Operations

(Millions of dollars, except per share data) December 31 2009 2008 2007 Revenues $19,233 $17,927 $16,115 Costs and expenses:

Cost of retail sales, buying, and occupancy $14,164 $13,129 $11,751 Selling, publicity, and administration 3,175 2,978 2,801 Depreciation 498 459 410 Interest expense, net 446 437 398 Taxes other than income taxes 343 313 283 Total costs and expenses $18,626 $17,316 $15,643 Earnings before income taxes $ 607 $ 611 $ 472 Provision for income taxes 232 228 171 Net earnings $ 375 $ 383 $ 301 Retail Corporation Consolidated Statements of Financial Position

(Millions of dollars)

December 31, ASSETS 2009 2008 Current assets:

Cash and cash equivalents $ 321 $ 117 Accounts receivable 1,536 1,514 Merchandise inventories 2,497 2,618 Other 157 165 Total current assets $ 4,511 $ 4,414 Property and equipment:

Land $ 1,120 $ 998 Buildings and improvements 4,753 4,342 Fixtures and equipment 2,162 2,197 Construction-in-progress 248 223 Accumulated depreciation (2,336) (2,197)

Net property and equipment $ 5,947 $ 5,563 Other 320 360 Total assets $10,778 $10,337 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:

Notes payable $ 200 $ 23 Accounts payable 1,654 1,596 Accrued liabilities 903 849 Income taxes payable 145 125 Current portion of long-term debt 173 371 Total current liabilities $ 3,075 $ 2,964 Long-term debt 4,279 4,330 Deferred income taxes and other 536 450 Loan to ESOP (217) (267)

Total liabilities $ 7,673 $ 7,477 Stockholders’ equity:

Preferred stock $ 368 $ 374 Common stock 72 71 Additional paid-in capital (common) 73 58 Retained earnings 2,592 2,357 Total stockholders’ equity $ 3,105 $ 2,860 Total liabilities and stockholders’ equity $10,778 $10,337 Required:

. Compute the four short-term liquidity ratios for 2008 and 2009 assuming operating cash flows are $281 million and $483 million, respectively.

. Indicate which ratios appear to be most appropriate for a retail organization. Indicate what other information you would like to know to comment on Retail’s shortterm liquidity.

Exercise