Suppose the following financial data were reported by 3M Company for 2021 and 2022 (dollars in millions). 3M Company Balance Sheets (partial) 2022 2021 Current assets Cash and cash equivalents $ 3,016 $1,892 Accounts receivable, net 3,035 3,105 Inventories 2,642 3,016 Other current assets 1,814 1,505 Total current assets $10,507 $9,518 Current liabilities $ 4,918 $5,824 (a) Calculate the current ratio and working capital for 3M for 2021 and 2022. (Round current ratio to 2 decimal places, e.g. 1.25 : 1.)
Suppose the following financial data were reported by 3M Company for 2021 and 2022 (dollars in millions). 3M Company Balance Sheets (partial) 2022 2021 Current assets Cash and cash equivalents $ 3,016 $1,892 Accounts receivable, net 3,035 3,105 Inventories 2,642 3,016 Other current assets 1,814 1,505 Total current assets $10,507 $9,518 Current liabilities $ 4,918 $5,824 (a) Calculate the current ratio and working capital for 3M for 2021 and 2022. (Round current ratio to 2 decimal places, e.g. 1.25 : 1.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**3M Company Balance Sheets (Partial)**
The following table presents financial data for 3M Company for the years 2021 and 2022, reported in millions of dollars.
| | 2022 | 2021 |
|------------------------------------|--------|--------|
| **Current Assets** | | |
| Cash and cash equivalents | $3,016 | $1,892 |
| Accounts receivable, net | $3,035 | $3,105 |
| Inventories | $2,642 | $3,016 |
| Other current assets | $1,814 | $1,505 |
| **Total current assets** | $10,507| $9,518 |
| **Current Liabilities** | $4,918 | $5,824 |
---
**(a) Calculation of Current Ratio and Working Capital**
Calculate the current ratio and working capital for 3M for 2021 and 2022. *(Round current ratio to 2 decimal places, e.g., 1.25 : 1.)*
---
**Current Ratio**
- **2021:** [Enter calculation] : 1
- **2022:** [Enter calculation] : 1
**Working Capital**
- **2021:** Total current assets - Current liabilities = $9,518 - $5,824
- **2022:** Total current assets - Current liabilities = $10,507 - $4,918
This information helps in understanding the company's liquidity position by assessing its ability to cover short-term obligations with short-term assets.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0b0ab463-4d4c-475b-97de-464c7d60d430%2F20563324-611d-4727-87b8-de461761ebef%2F9ik53xt_processed.png&w=3840&q=75)
Transcribed Image Text:**3M Company Balance Sheets (Partial)**
The following table presents financial data for 3M Company for the years 2021 and 2022, reported in millions of dollars.
| | 2022 | 2021 |
|------------------------------------|--------|--------|
| **Current Assets** | | |
| Cash and cash equivalents | $3,016 | $1,892 |
| Accounts receivable, net | $3,035 | $3,105 |
| Inventories | $2,642 | $3,016 |
| Other current assets | $1,814 | $1,505 |
| **Total current assets** | $10,507| $9,518 |
| **Current Liabilities** | $4,918 | $5,824 |
---
**(a) Calculation of Current Ratio and Working Capital**
Calculate the current ratio and working capital for 3M for 2021 and 2022. *(Round current ratio to 2 decimal places, e.g., 1.25 : 1.)*
---
**Current Ratio**
- **2021:** [Enter calculation] : 1
- **2022:** [Enter calculation] : 1
**Working Capital**
- **2021:** Total current assets - Current liabilities = $9,518 - $5,824
- **2022:** Total current assets - Current liabilities = $10,507 - $4,918
This information helps in understanding the company's liquidity position by assessing its ability to cover short-term obligations with short-term assets.
Transcribed Image Text:### Working Capital Section
**Working Capital:**
- **2021:** $ _______ million
- **2022:** $ _______ million
---
### (b) Scenario Analysis
Suppose that at the end of 2022, 3M management used $220 million cash to pay off $220 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
---
This section provides a framework for understanding the impact of financial decisions on a company's liquidity. The focus is on how the payment of accounts payable using cash affects the working capital and the current ratio, a key indicator of financial health. By adjusting these parameters, one can gauge the potential shifts in the company's financial strategy and stability.
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