Exercise 10-16 3M Company Balance Sheets (partial) 2017 2016 Exercise 10-16 Supp

Question

Exercise 10-16

3M Company
Balance Sheets (partial)

2017

2016

Exercise 10-16

Suppose the following financial data were reported by 3M Company for 2016 and 2017 (dollars in millions).

3M Company
Balance Sheets (partial)

2017

2016

Current assets     Cash and cash equivalents $ 3,012 $1,872     Accounts receivable, net 3,155 3,185     Inventories 2,609 3,026     Other current assets 1,814 1,534         Total current assets $10,590 $9,617 Current liabilities $ 4,925 $5,884
(a)

Calculate the current ratio and working capital for 3M for 2016 and 2017. (Round current ratio to 2 decimal places, e.g. 1.25 : 1.)
Current ratio 2016

:1 2017

:1 Working capital 2016 $

million 2017 $

million
(b)

Suppose that at the end of 2017, 3M management used $180 million cash to pay off $180 million of accounts payable. How would its current ratio and working capital have changed? (Round current ratio to 2 decimal places, e.g. 1.25 : 1.)
Current ratio

:1 Working capital $

million

Explanation / Answer

a Current ratio=Total current assets/Current liabilities 2016 1.63 =9617/5884 2017 2.15 =10590/4925 Working=Total current assets-Current liabilities 2016 3733 =9617-5884 2017 5665 =10590-4925 b Current ratio 2.19 =(10590-180)/(4925-180) Working capital 5665 =(10590-180)-(4925-180)

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