Determine the working capital and current ratios for 2009, 2010, and 2011

GREEN MOUNTAIN COFFEE ROASTERS INC.
FINANCIAL ANALYSIS AND INTERPRETATION

Part 3 of the Final Exam requires you to complete and submit the Green Mountain Coffee Roasters Analysis and Interpretation essay. Green Mountain Coffee Roasters Inc. financial data can be found in Appendix A of your textbook. NOTE: online research will be necessary. Not all the information needed to answer the questions is located within the case study.

Compose your essay in a Word document. Check your spelling, grammar, word usage, and sentence structure. Be sure that you have completely answered all the questions asked and addressed all components of the essay requirements listed below.

Essay Requirements

You must answer two sets of questions in your essay as listed in the boxes below. The following background information will help you in writing the essay.

The ability of a business to meet its short-term cash requirements is called liquidity. This is affected by the timing of a company’s cash inflows and outflows along with prospects for future performance.Efficiencyrefers to how productive a company is in using its assets, and it is usually measured relative to how much revenue is generated from a particular level of assets. Both components are important and complementary.

Two measures for evaluating a business's short-term liquidity are working capital and the current ratio. Working capital is the dollar amount of a company’s current assets less current liabilities as shown below:

Working capital = Current assets - Current liabilities

An excess of the current assets compared to current liabilities implies that the company is able to pay its current liabilities. If the current liabilities are greater than the current assets, the company may not be able to pay its debts and continue in business.

The current ratio is another means of expressing the relationship between current assets and current liabilities. The current ratio is computed by dividing current assets by current liabilities, as shown below.

Current ratio = Current assets/Current liabilities

The current ratio enables you to compare the liquidity of different-sized companies and
the liquidity of a single company at various times. Both of these financial measures become even more relevant when comparing your present results to those of previous years.

Asset Turnoverreflects a company’s ability to use its assets to generate sales and is an important indication of operating efficiency. This measurement tells the analyst how many dollars of sales a company generates for each dollar invested in assets. It is computed by dividing net sales by average total assets, as shown below.

Asset Turnover = Net Sales/Average Total Assets

Determine the asset turnover ratio for 2009 and 2010 using the information contained in the consolidated balance sheet and income statement for the Green Mountain Coffee Roasters Inc. in Appendix A of your textbook.