The Kroger Company is one of the world's largest supermarket chains. These selected items were adapted from Kroger's balance sheet as of January 30, 2016. (Dollar amounts are in millions.)
Cash (including temporary investments and deposit-in-transit) ........... $1,200
Receivables ........................................................................ 1,734
Merchandise inventories ....................................................... 7,368
Other current assets ............................................................. 790
Property, plant and equipment (net of depreciation) ...................... 19,619
Retained earnings ............................................................. 14,011
Total current liabilities ....................................................... 12,971
Instructions
a. Using this information, compute the amounts of Kroger's total current assets and total quick assets.
b. Compute the company's (1) current ratio, (2) quick ratio, and (3) working capital. (Round ratios to two decimal points.)
c. From these computations, are you able to conclude whether Kroger is a good credit risk for short-term creditors or on the brink of bankruptcy? Explain.
d. Is there anything unusual about the operating cycle of supermarkets that would make you think that they normally would have lower current ratios than, say, large department stores?
e. What other types of information could you utilize in performing a more complete analysis of Kroger's liquidity?