Current Position Analysis

Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years:

Current Year (in millions)Previous Year (in millions)

Cash and cash equivalents$2,544 $2,722

Short-term investments, at cost1,807 5,054

Accounts and notes receivable, net5,745 5,184

Inventories1,893 1,261

Prepaid expenses and other current assets631 467

Short-term obligations252 2,678

Accounts payable6,058 5,962

a. Determine the (1) current ratio and (2) quick ratio for both years. Round to one decimal place.

Current YearPrevious Year

1. Current ratio

2. Quick ratio

b. The liquidity of Sherwood has increased some over this time period. Both the current and quick ratios have increased . Sherwood is a strong company with ample resources for meeting short-term obligations. Its liquidity as measured by the current and quick ratios has improved during this period.