Analysis and Interpretation of Liquidity and Solvency

Balance sheets and income statements for $3$M Company follow.

$3$M COMPANY

Consolidated Statements of Income

For Years Ended December $31($$ millions$)20182017$

Net sales $$32,765$ $$31,657$

Operating expenses

Cost of sales $16,68216,055$

Selling, general and administrative expenses $7,6026,626$

Research, development and related expenses $1,8211,870$

Gain on sale of businesses $(547)(586)$

Total operating expenses $25,55823,965$

Operating income $7,2077,692$

Other expense, net$*207144$

Income before income taxes $7,0007,548$

Provision for income taxes $1,6372,679$

Net income including noncontrolling interest $5,3634,869$

Less: Net income attributable to noncontrolling interest $1411$

Net income attributable to $3$M $$5,349$ $$4,858$

$*$ Interest expense, gross is $$350$ million in $2018$ and $$322$ million in $2017.$

$3$M COMPANY

Consolidated Balance Sheets

At December $31($$ millions$)20182017$

Current assets

Cash and cash equivalents $$2,853$ $$3,053$

Marketable securities $3801,076$

Accounts receivable $5,0204,911$

Total inventories $4,3664,034$

Prepaids $741937$

Other current assets $349266$

Total current assets $13,70914,277$

Property, plant and equipment, net $8,7388,866$

Goodwill $10,05110,513$

Intangible assets$$net $2,6572,936$

Other assets $1,3451,395$

Total assets $$36,500$ $$37,987$

Current liabilities

Short$-$term borrowings and current portion of long$-$term debt $$1,211$ $$1,853$

Accounts payable $2,2661,945$

Accrued payroll $749870$

Accrued income taxes $243310$

Other current liabilities $2,7752,709$

Total current liabilities $7,2447,687$

Long$-$term debt $13,41112,096$

Pension and postretirement benefits $2,9873,620$

Other liabilities $3,0102,962$

Total liabilities $$26,652$ $$26,365$

$3$M Company shareholders$$ equity

Common stock par value $99$

Additional paid$-$in capital $5,6435,352$

Retained earnings $40,63639,115$

Treasury stock $(29,626)(25,887)$

Accumulated other comprehensive income $($loss$)(6,866)(7,026)$

Total $3$M Company shareholders$$ equity $9,79611,563$

Noncontrolling interest $5259$

Total equity $9,84811,622$

Total liabilities and equity $$36,500$ $$37,987$

Required

a$.$ Compute the current ratio and quick ratio for $2018$ and $2017.$

Note: Round your answers to two decimal places $($for example, enter $6\mathrm{.}78$ for $6\mathrm{.}77555).$

$20182017$

Current ratio Answer

$1\mathrm{.}89$

Answer

$1\mathrm{.}86$

Quick ratio

$2018?$

$2017?$