The following financial data were reported by 3M Company for 2005 and 2006 (dollars
in millions).
| 3M Company | ||
| Balance Sheet (partial) | ||
| 2006 | 2005 | |
| Current assets | ||
| Cash and cash equivalents | 1,918 | 1,072 |
| Accounts receivable, net | 3,769 | 2,838 |
| Inventories | 2,601 | 2,162 |
| Other current assets | 658 | 1,043 |
| Total current assets | 8,946 | 7,115 |
| Current liabilities | 7,323 | 5,238 |
Instructions
(a) Calculate the current ratio and working capital for 3M for 2005 and 2006.
(b) Suppose at the end of 2006, 3M management used $300 million cash to pay off $300 million
of accounts payable. How would the current ratio and working capital have changed?
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