Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 10, Problem 10.4ADM
Cabela’s and Dicks Sporting Goods: Short-term liquidity analysis
Cabela’s Incorporated is a leading specialty retailer of outdoor sports merchandise. Dick’s Sporting Goods, Inc. is a leading full-line retailer of sporting equipment and apparel. The current assets and current liabilities of both companies are provided as follows from recent financial statements (in millions):
| Cabela’s | Dick’s | |
| Current assets: | ||
| Cash | $ 478 | $ 345 |
| 62 | 35 | |
| Credit card loans | 4,422 | — |
| Inventories | 760 | 1,096 |
| Other current assets | 216 | 120 |
| Total current assets | $5,938 | $1,596 |
| Current liabilities: | ||
| Accounts payable | $ 336 | $ 508 |
| Gift cards | 340 | — |
| Other current liabilities | 1,445 | 493 |
| Total current liabilities | $2,121 | $1,001 |
Cabela’s has a branded credit card that is the basis for its financial services business. “Credit card loans” in Cabela’s current assets represent the amounts due from Cabela’s CLUB® Visa credit card customers. The credit card loans represent 1,817,012 active accounts with an average balance of $2,167. The credit card holders have a median FICO score of 795, which denotes highly creditworthy customers. Cabela’s other current liabilities include, among other items, short-term funding to support credit card purchases from its CLUB members.
A. What do the “gift cards” listed under Cabela’s current liabilities represent?
B. Should the “credit card loans” be considered part of quick assets for Cabela’s computation of the quick ratio? Explain.
C. Compute the
D. Compute the quick ratio for Cabela’s and Dick’s Sporting Goods. (Round to one decimal place.)
E. Compare the two companies using the computations in (C) and (D).
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Selected financial data regarding current assets and current liabilities for Queen's Line, a competitor in the cruise line industry, is provided:
($ in millions)
Current assets:
Cash and cash equivalents
$
429
Current investments
94
Net receivables
224
Inventory
108
Other current assets
131
Total current assets
$
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Current liabilities:
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$
1,010
Short-term debt
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Other current liabilities
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Total current liabilities
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Required:
1. Calculate the current ratio and the acid-test ratio for Queen's Line. (Enter your answers in millions, not in dollars. For example, $5,500,000 should be entered as 5.5.)
Selected financial data regarding current assets and current liabilities for Queen’s Line, a competitor in the cruise line industry, is provided:($ in millions)Current assets: Cash and cash equivalents $ 331 Current investments 63 Net receivables 230 Inventory 116 Other current assets 135Total current assets $ 875 Current liabilities: Accounts payable $1,025 Short-term debt 694 Other current liabilities 919 Total current liabilities $2,638Required:1. Calculate the current ratio and the acid-test ratio for Queen’s Line.
Privett Company
Line Item Description
Amount
Accounts payable
$27,815
Accounts receivable
70,978
Accrued liabilities
6,525
Cash
22,970
Intangible assets
43,640
Inventory
74,446
Long-term investments
100,209
Long-term liabilities
78,528
Marketable securities
34,768
Notes payable (short-term)
25,264
Prepaid expenses
2,065
Property, plant, and equipment
646,687
Based on the data for Privett Company, what is the amount of working capital?
a. $205,227
b. $995,763
c. $128,716
d. $145,623
Chapter 10 Solutions
Corporate Financial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 7DQCh. 10 - Installment notes require equal periodic payments....Ch. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ
Ch. 10 - Proceeds from notes payable On January 26, Nyree...Ch. 10 - Prob. 10.2BECh. 10 - Journalize period payroll The payroll register of...Ch. 10 - Prob. 10.4BECh. 10 - Prob. 10.5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Prob. 10.7BECh. 10 - Current liabilities Bon Nebo Co. sold 25,000...Ch. 10 - Entries for notes payable Bennett Enterprises...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - Entries for notes payable A business issued a...Ch. 10 - Entries for discounted note payable A business...Ch. 10 - Fixed asset purchases with note On June 30,...Ch. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 44 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Summary payroll data In the following summary of...Ch. 10 - Payroll tax entries According to a summary of the...Ch. 10 - Payroll entries The payroll register for D. Salah...Ch. 10 - Prob. 10.13EXCh. 10 - Prob. 10.14EXCh. 10 - Prob. 10.15EXCh. 10 - Accrued vacation pay A business provides its...Ch. 10 - Prob. 10.17EXCh. 10 - Prob. 10.18EXCh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 10.22EXCh. 10 - Prob. 10.23EXCh. 10 - Prob. 10.24EXCh. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data on employer FICA tax...Ch. 10 - Prob. 10.4APRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 10.1BPRCh. 10 - Prob. 10.2BPRCh. 10 - Wage and tax statement data and employer FICA tax...Ch. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 3COPCh. 10 - Prob. 10.1ADMCh. 10 - Prob. 10.2ADMCh. 10 - Neiman Marcus and Kohls: Short-term liquidity...Ch. 10 - Cabelas and Dicks Sporting Goods: Short-term...Ch. 10 - Ethics in Action Tonya Latirno is a staff...Ch. 10 - Prob. 10.3TIF
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