P4-37 Analysis and interpretation of liquidity and solvency

refer to the financial information of 3M company in P4-36 to answer the following requirements

a. Compute the current ratio and quick ratio for 2012 and 2011. Comment on any observed trends.

b. Compute times interest earned and liabilities-to-equity ratios for 2012 and 2011. Comment on any noticeable changes.

c. Summarize your findings about the company?s liquidity and solvency. Do you have any concerns about its ability to meet its debt obligations?

check attachment for income statement

3M Income Statement Year ended December 31 ($ millions) Net Sales Operating Expenses Cost of Sales Selling, general and administrative expenses Research, development and related expenses $ 2012 29,904 $ 2011 29,611 2010 $ 26,662 $ $ $ 15,685 6,102 1,634 $ $ $ 15,693 6,170 1,570 $ 13,831 $ 5,479 $ 1,434 Total Operating income $ $ 23,421 6,483 $ $ 23,433 6,178 $ 20,744 $ 5,918 Interest expense and income Interest expense Interest income Total $ $ $ 171 (39) 132 $ $ $ 186 (39) 147 $ $ $ 201 (38) 163 Income before income taxes Provision for income taxes Net Income including noncontrolling interest Less: Net income attributable to nontrolling interest Net Income $ $ $ $ $ 6,351 1,840 4,511 55 4,456 $ $ $ $ $ 6,031 1,674 4,357 51 4,306 $ $ $ $ $ 5,755 1,592 4,163 55 4,108 3M Balance Sheet Year ended December 31 ($ millions) Assets Cash and cash equivalents Marketable securities - current Accounts receivable - net of allowances of $105 and $108 Inventories Finished goods Work in process Raw materials and supplies Total inventories Other current assets Total current assets Marketable securities - noncurrent Investments Property, plant, and equipment Less: Accumulated depreciation Property, plant, and equipment - net Goodwill Intangible assets - net 2012 $ $ $ $ $ $ $ $ $ $ $ $ 2011 2,883 $ 1,648### $ 4,061### $ 1,754### 1,186 897 3,837 1,201 13,630 1,162 163 22,525 ($11,808) $ 10,717 $ 7,385 $ 1,925 2,219 471 3,867 $ $ $ $ $ $ 1,536 1,061 819 3,416 1,277 11,250 $ $ $ 896 155 21,166 ($11,110) 10,056 7,666 1,916 $ $ $ Prepaid pension and postretirement benefits Other assets Total assets Liabilities and stockholders' equity Short-term borrowings and current portion of long-term debt Accounts payable Accrued payroll Accrued income taxes Other current liabilities Total current liabilities Long-term debt Other liabilities Total liabilities Stockholders' equity Common stock, par value $.01 per share (Shares outstanding 2012: 687,091,650; Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income tax Stockholders' equity - net NonControlling Interest Total liabilities and stockholders' equity $ $ 16 1,217 $ $ 40 1,656 $ 36,215 $ 33,635 $ $ $ $ $ $ $ $ $ 1,085 1,762 701 371 2,281 6,200 4,916 1,634 12,750 $ $ $ $ $ $ $ $ $ 682 1,643 676 355 2,085 5,441 4,484 1,857 11,782 $ $ $ 9 4,044### 30,679 ($12,407) ($747) $ 21,578 $ 465 $ $ $ $ $ 34,328 9 3,767 28,348 ($11,679) ($1,873) $ 18,572 $ 442 30,354