# Analyze Sears Holding Corporation Soars Holdings Corporation (SHLD) is one of the largest mall-based retailers in the United States. The following year-end data were taken from a recent Sears balance sheet (in millions): December 31 Year 2 Year 1 Current assets $6,045$5,863 Current liabilities 5,438 5,595 a. Compute the working capital and the current ratio as of December 31, Year 1 and Year 2. Round to two decimal places. b. What conclusions concerning the company’s ability to meet its short-term obligations can you draw from part (a)?

### Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169

Chapter
Section

### Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Textbook Problem
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## Analyze Sears Holding CorporationSoars Holdings Corporation (SHLD) is one of the largest mall-based retailers in the United States. The following year-end data were taken from a recent Sears balance sheet (in millions):   December 31   Year 2 Year 1 Current assets $6,045$5,863 Current liabilities 5,438 5,595 a. Compute the working capital and the current ratio as of December 31, Year 1 and Year 2. Round to two decimal places.b. What conclusions concerning the company’s ability to meet its short-term obligations can you draw from part (a)?

a.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. 1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1. The following formula is used to calculate current ratio.
2. 2. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To Compute:  The working capital and current ratio as of December 31 for Year 2 and Year 1.

### Explanation of Solution

 Details Year 2 ($) Year 1 ($) Current assets 6,045 5,863 Less: Current liabilities 5,438 5,595 Working capital $607$268

Table (1)

Calculate the current ratio for Year 2 and Year 1.

Current ratio for year 2=Current assetsCurrentliabi

b.

To determine

To Explain: The ability of a company to meet its short-term obligations.

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