Chapter 10, Problem 10.3ADM

Neiman Marcus and Kohl’s: Short-term liquidity analysis

Neiman Marcus Group is one of the largest luxury fashion retailers in the world. Kohl’s Corporation sells moderately priced private and national branded products through more than 1,100 department stores located throughout the United States. The current assets and current liabilities at the end of a recent year for both companies are as follows (in millions):

	Neiman Marcus	Kohl’s
Current assets:
Cash	$ 197	$1,407
Inventories	1,069	3,814
Other current assets	144	477
Total current assets	$1,410	$5,698
Current liabilities:
Accounts payable	$ 375	$1,511
Other current liabilities	482	1,348
Total current liabilities	$ 857	$2,859

A. Would an analysis of working capital between the two companies be meaningful? Explain.

B. Compute the quick ratio for both companies. (Round to the nearest decimal.)

C. Interpret your results.