Financial Accounting: An Integrated Statements Approach, 2nd Edition

488 Chapter 10 Liabilities

2004 2003 2002 2001 2000

Cash and cash equivalents $ 2,668 $1,818 $ 949 $ 431 $ 745

Short-term investments 3,690 2,511 2,063 2,513 3,258

Accounts receivable 1,696 1,451 1,217 1,078 2,204

Inventories 1,256 984 790 751 1,233

Other current assets 880 945 1,107 1,002 675

Total current assets $10,190 $7,709 $6,126 $5,775 $8,115

Notes payable $ 11 $ 437 $ 422 $ 38 $ 148

Accounts payable and accrued expenses 1,444 1,496 1,204 1,205 1,921

Other current liabilities 470 267 308 337 744

Total current liabilities $ 1,925 $2,200 $1,934 $1,580 $2,813

BellSouth Corp. Belk, Inc.

(in millions) (in thousands)

Dec. 31, 2004 Jan. 29, 2005

Amount % Amount %

Cash $ 696 12.2% $ 232,264 21.2%

Accounts receivable 2,559 44.9% 319,706 29.1%

Merchandise inventory — — 527,860 48.1%

Materials and supplies 321 5.6% — —

Other 2,123 37.3% 17,302 1.6%

Total current assets $ 5,699 100.0% $1,097,132 100.0%

Accounts payable $ 1,047 10.1% $ 177,793 57.6%

Short-term debt 5,475 52.8% 8,199 2.7%

Other 3,848 37.1% 122,397 39.7%

Total current liabilities $10,370 100.0% $ 308,389 100.0%

Current ratio 0.550 3.558

Quick ratio 0.314 1.790

BellSouth Corp. Belk, Inc. Difference

Current Ratio 0.550 3.558 3.008

Quick Ratio 0.314 1.790 1.476

Difference 0.236 1.768

1. Why is the current ratio of the department store 3.008 greater than the current ratio of the
   telecommunications company?


2. Why is the quick ratio of the department store 1.476 greater than the quick ratio of the
   telecommunications company?


3. Why are the differences between the current and quick ratios much larger for the depart-
   ment store than they are for the telecommunications company (1.768 vs. 0.236)?

The current assets and current liabilities for Texas Instruments Inc.for five recent years are

shown as follows (in millions):

Case 10-5

Current and quick ratios

across time

Case 10-6

Long-term solvency measures

for two aerospace companies

1. Calculate and graph the current and quick ratios for the five comparative years. Round to
   two decimal places.


2. Interpret your graph.

TheLockheed Martin Corp.andNorthrop Grumman Corp.are two major defense contractors.

A partial balance sheet for the end of a recent fiscal year is shown as follows (in millions):