Current Position Analysis

Sherwood, Inc., the parent company of Tasty snack foods and Super 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 $5,228 $5,451 Short-term investments, at cost 3,714 10,123 Accounts and notes receivable, net 11,804 10,382 Inventories 1,353 1,805 Prepaid expenses and other current assets 451 667 Short-term obligations 361 3,832 Accounts payable 8,659 8,528

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

Current Year Previous 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.