Question 4 [35]

The following information relates to the telecommunication equipment industry and the semiconductor industry. Motorola Corporation is a leading manufacturer and supplier in the telecommunications industry. The information provided below includes selected financial information relating to Motorola Corporation together with comparative financial ratios from the two industries. The information provided has been adapted to suit the questions.

The telecommunications industry is extremely competitive and includes major corporations such as AT & T Inc., Verizon Communications Inc., Motorola and many others.

Extracts from the financial statements and selected financial ratios for Motorola Corporation

	2019	2018	2017	2016
	R000s	R000s	R000s	R000s
Cash and cash equivalents	6 507	6 082	3 301	3 537
Short-term investments	59	80	354	699
Accounts receivable, net	4 437	4 583	7 092	5 627
Inventories, net	2 869	2 756	5 242	3 707
Other current assets	3 262	3 648	3 896	4 015
Total current assets	17 134	17 149	19 885	17 585

Notes payable and current portion of long-term debt	1 524	870	6 391	2 504
Accounts payable	2 268	2 434	3 492	3 285
Accrued liabilities	5 913	6 394	6 374	7 117
Total current liabilities	9 705	9 698	16 257	12 906
Current ratio	1.77	1.77	1.22	1.36
Quick ratio	1.47	1.48	0.90	1.08

Selected financial ratios for Motorola Corporation and the telecommunications equipment and semiconductor industries.

	Motorola	Semiconductor industry	Telecommunication equipment industry
Current ratio	1.77	2.44	1.52
Quick ratio	1.47	2.08	1.23
Average collection period	61 days	50 days	73 days
Inventory turnover	6.25	6.01	5.66

Required:

4.1. Use the information provided to calculate Motorolas net working capital for each of the years 20162019. (8)

4.2. Discuss Motorolas liquidity position when compared with those of the two industries for the period 20162019. (27)