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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)?

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Corporate Financial Accounting

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

Corporate Financial Accounting

15th Edition
Carl Warren + 1 other
Publisher: Cengage Learning
ISBN: 9781337398169
Chapter 4, Problem 4.5MAD
Textbook Problem
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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. Chapter 4, Problem 4.5MAD, Analyze Sears Holding Corporation Soars Holdings Corporation (SHLD) is one of the largest mall-based 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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Chapter 4 Solutions

Corporate Financial Accounting
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Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Statement of stockholders equity Scott Lockhart...Ch. 4 - Classified balance sheet The following accounts...Ch. 4 - Closing entries After the accounts have been...Ch. 4 - Accounting cycle From the following list of steps...Ch. 4 - Working capital and current ratio Current assets...Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Classifying accounts Balances for each of the...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Income statement The following account balances...Ch. 4 - Income statement; net loss The following revenue...Ch. 4 - Income statement FedEx Corporation (FDX) had the...Ch. 4 - Statement of stockholders equity Climate Control...Ch. 4 - Statement of stockholders equity; net loss...Ch. 4 - Classifying assets Identify each of the following...Ch. 4 - Balance sheet classification At the balance sheet...Ch. 4 - Balance sheet Dynamic Weight Loss Co. offers...Ch. 4 - Balance sheet The following balance sheet was...Ch. 4 - Identifying accounts to be closed From the list...Ch. 4 - Closing entries with net income Automation...Ch. 4 - Closing entries with net loss Summit Services Co....Ch. 4 - Identifying permanent accounts Which of the...Ch. 4 - Post-closing trial balance An accountant prepared...Ch. 4 - Steps in the accounting cycle Rearrange the...Ch. 4 - Appendix 1 Completing an end-of-period spreadsheet...Ch. 4 - Appendix 1 Adjustment data on an end-of-period...Ch. 4 - Appendix 1 Completing an end-of-period spreadsheet...Ch. 4 - Appendix 1 Financial statements from an...Ch. 4 - Appendix 1 Adjusting entries from an end-of-period...Ch. 4 - Appendix 1 Closing entries from an end-of-period...Ch. 4 - Appendix 2 Reversing entry The following adjusting...Ch. 4 - Appendix 2 Adjusting and reversing entries On the...Ch. 4 - Appendix 2 Adjusting and reversing entries On the...Ch. 4 - Appendix 2 Entries posted to wages expense account...Ch. 4 - Appendix 2 Entries posted to wages expense account...Ch. 4 - Financial statements and closing entries 8.Net...Ch. 4 - Financial statements and closing entries Foxy...Ch. 4 - accounts, adjusting entries, financial statements,...Ch. 4 - Net Income: 51,150 Ledger accounts, adjusting...Ch. 4 - Net income: 43,475 Complete accounting cycle For...Ch. 4 - Financial statements and closing entries Last...Ch. 4 - Financial statements and closing entries The...Ch. 4 - Income: 27,350 accounts, adjusting entries,...Ch. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Net income: 53,77S Complete accounting cycle For...Ch. 4 - Comprehensive Problem 1 8 Net income. 31,425...Ch. 4 - Working Capital and Current Ratio Analyze and...Ch. 4 - Analyze and compare Zynga, Electronic Arts, and...Ch. 4 - Analyze and compare Foot Locker and The Finish...Ch. 4 - Analyze Under Armour The following year-end data...Ch. 4 - Analyze Sears Holding Corporation Soars Holdings...Ch. 4 - Analyze and compare Alphabet (Google) and...Ch. 4 - Ethics in Action New Wave Images is a graphics...Ch. 4 - Communication Your friend, Daniel Nat, recently...Ch. 4 - Financial statements The following is an excerpt...Ch. 4 - Financial statements and loan Assume that you...

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